YOUR MONEY

Money madness rolls on

The emerging nations of the world – Brazil, India, Indonesia, South Africa and Turkey – which account for 25.4% of the entire world 2013 population [Wikipedia, “ List of countries by population”]  have lost 13% to 18% in the value of their currency since the start of the year. [G&M Sept. 5, 2013, chart on B7].

Canada’s dollar fluctuates some ½ cent or more daily, and has been gyrating up and down from close to par with the US dollar to 94½  cents – up to a 5% drop in value.

Why?  Because all of the above countries and governments – and most of the governments on the planet -- allow their currency to ‘float’ on the open market –including to a degree China’s Yuan.

And this ‘floating rate’ is not set by the World Bank or the International Monetary Fund.  It is the result of the open market in money exchanges and what some dealer, bank, derivative, pension fund or billionaire speculator with a crystal ball ‘foresees’ as the short term (weeks to months) economic trend of a given country.   If an economy seems to be about to be going up, with more GDP expected, the currency becomes ‘stronger’ against other monies, and if the economy looks as if it is about to become weaker, the reverse occurs.

Sounds like good capitalism but the money exchange banks, and multi-billion dollar funds and derivatives really only care about the cash, not the best interest of the economy.  A ‘play’ that triggers a broad market rise or sell off of just a fraction of a penny can reap millions for the money exchange manipulators!  Their computer trading programs are that quick to make a buck!!!

So, put simply, governments have by and large abrogated one of the two fundamental roles of a government>

Role #1 is to ensure the safety and security of its people; to maintain law and order within and protect the nation from outside assault.

Role #2, is to ensure it people have the economic opportunity to prosper and do well; to make a living and maybe ‘move up in the material world’ through effort and initiative.

 

Role #2 no longer exists outside of special interest tariffs and duties – something the world’s governments are working to eliminate in the name of open economic trade – the European Economic Union being the best example, NAFTA for Canada, the USA and Mexico, and the new Pacific Rim coalition that both Canada and the USA are currently trying to join.

By allowing ‘others’ to set the value of their currencies, governments ensure businesses, ordinary citizens and especially pensioners on fixed incomes have no secure future!

If the Canadian dollar drops buying US and other imported goods and food costs moreat the store, and such increases are multiplied by the various layers in the delivery and distribution system.

Meanwhile, if the Canadian dollar drops compared to the US dollar, our exporters smile all the way to the bank -- as the US accounts for some 80% of our export market.

And if the Canadian dollar rises, the reverse is true.  Importers love it as outside goods become cheaper, while exporters lose markets as their costs become, instantly, ‘higher’.

Put simply, fluctuating currency exchanges pit ordinary citizens, the poor and importing companies against the interests of the relatively few, often highly profitable export firms.

And profit 'speculators' the most because they are really in control of this 'rigged' game.

 

So, the drop in emerging country currency values is no joking matter.  It may help their exporters gain an ‘edge’, but when most food stuffs and finished goods are imported, these changes, especially when over 5%, make life harder for millions in these ‘developing’ countries – and even in first world Canada!

 

My solution, as often posted before, is a return to some fixed currency model.

Either backing paper money with gold or platinum or diamonds at a globally accepted fixed price, or collapsing the world’s currencies into 3 linked denominations as set by the World Bank: the US greenback, the EURO and China’s Yuan.

Otherwise, economic chaos will inevitably ensue, undermining stabile government, world efforts at ‘freer’ trade and, in a worst case scenario, the suffering of the Great Depression which led to extreme nationalism, imperialism and World War II.