Developing economies, it seems, can benefit from the fixed exchange rates and the certainty and stability they promote. Developed economies perhaps need the natural market adjustments built into the float system to help diminish the boom/bust cycle and to promote stability.
Certainty and stability will never be guaranteed for long, particularly under the current scenario.
The true value of a specific currency is in the productivity, fiscal responsibility, and the ability (willingness) to save of a society.
Asserting, (fixing, attaching), values to a commodity, (gold or a basket of several), or to a specific currency (for the time being the strong one), etc. seem to be or have proven temporary fixes.
It all depends in how the society in questions develops, the available technology progresses and how good the demagogues are at telling, (or forcing) the locals (these days, the entire world), to believe them in their theories and policies.
All the free markets do, (even if you define free markets as a band of techno-wizard currency traders), is react to specific situations, recognizing that the theories, policies, or whatever in a specific country are, (or soon will be), valuating the currency in question higher than what accepted parameters would measure it otherwise, particularly when "matching value" against other currencies of countries that are more "productive, established, or safe" (take your pick).
Whatever social engineering intended by a specific government funded program, or worse, a crooked leader that takes control of a country, and manages it, as if it was a cash cow for his benefit and that of his cronies, (usually relatives and drinking buddies), no doubt will cause the currency in question to eventually explode (devalue).
In the case of gold, the historical precedent gives gold a special situation of "perceived" value, reinforced by the assumption that the politician will not print more currency than the gold kept in the basement would back up, given a specific established exchange.
But what if, a country is capable of really behave as far as fiscal policies, figures out a way to be impressively and efficiently productive, and somehow the citizens of such country actually save ?
In addition, if we remove the ability of politicians to cheat the populations of the different countries, given that now, we have the technology, that allows mercenary currency traders acting as "police of the efficiency monster" which, to boot, does not need a salary as they provide their own, (at the expense of the inefficient leaders), then the system has provided a true standard of value, that it is self regulating.
This I see it more than a "cruel reality", which I am sure that for many countries is turning out to become. On the contrary, I see it as the final realization that unless every citizen of every country should become productive and responsible, the leaders disciplined in fiscal policies that should be implemented, not to punish the most productive members of its society, but simply to pay for those infrastructures that are needed based on flatly equal and in common sense, not based simply on "from those who can to those who need".
These will motivate everyone to strive for better standards, and in turn stability should come around. I am not saying that it will be easy, but if we insist in what so far has proven to be voodoo, more of the same is what we will get.
Whether the different societies are capable of this remain to be seen, do not forget that uncontrolled population explosions will make the achievement of the above even harder, the larger the population the harder it becomes.
At the base of all this, is the level of education and skill to be productive in the different industries that make up a society, translating in the most efficient use of resources available, that includes from labor costs, to the influence that the wether provides... as in "try to grow bananas in Alaska..."
In fact, sometimes I think that a degree of "sentiment" should be considered, as society can not ignore how its own members will react to specific situations and circumstances.
Only my humble opinion in this subject that fascinates me and confuses me, all at the same time.
Z. |
