In: Operations Management
agree or not?
Do you think an international monetary system with currencies valued on the basis of gold would work today? Why or why not?
I don’t think that an international monetary system with currencies valued on the basis of gold would work today because in the past when the nations involved in the first world war needed to finance their wars expenses, they needed to print more money and that is impossible to do when the money is tied to a fix rate such as gold. Furthermore, doing so would cause rapid inflations. Imagine if the world monetary system was tied to gold during this pandemic of the covid-19, nations wouldn’t been able to print more money to boost the economy, companies would have to close for good, and a raise in unemployment would have been unavoidable. U.S. would have being unable to get a stimulus package worth trillions of dollars to help families and businesses (Wild and Wild, 2019).
Do you think implementing a global version of the old European monetary system would work today? Why or why not?
I don’t believe that an old European monetary system would work in today’s economy because it requires for members to de-and revalue their currencies if necessary. Any monetary system that is based on speculation, in my opinion is soon to be doomed. We could see how this type of system failed in the past and how it could fail again in the future when both the British pound and the Italian lira had been on the lower fringe of the allowable 2.25 percent fluctuation range with the German mark and currency speculators began unloading their pounds and lira. When the central banks of neither Britain nor Italy had enough money to buy their currencies back, their currencies plummet and they were forced to leave they ERM (Wild and Wild, 2019).
Are cryptocurrencies the future?
I do believe that cryptocurrencies have the potential to become a monetary system for the future. If cryptocurrencies are able to find a way to have a central authority that could ensure that things could run smoothly or back the value, then they could become the future of currencies. Another thing that cryptocurrencies should work on before it could become widely acceptable is to find a way to keep the value more steadily instead of the wildly swings that it’s possible to have in its value. I believe the closest to become a cryptocurrency of the future is Libra. Libra is a blockchain technology just like bitcoin but with a stable value backed by a reserve of assets made up cash or cash equivalents and very short-term government securities. The idea was introduced by Facebook associates and other companies that were named as the Libra Association first members and the reserve basket would be made up 50% U.S. dollar, 18% Euro, 14% Japanese yen, 11% Pound sterling and 7% Singapore dollar (libra.org, n.d.)
answer-
response to first question-
I agree with you point of view because i also think that Gold view as standard is old and not effective anymore. Gold is resource which can be abundance in one country while scarce in another country so if we set this gold as standard to print money then one country will be rich and able to print more money while another country will be poor. This will create huge gap of povery. Lack of gold means poor country will not be able to pay its debts and unemployment will raise. Situations like COVID-19 will not be solved in such countries if gold standard is used.
Response to second question-
Yes, it is true and i agree that old EMS sysem is outdated and should not be used because it would not work well in such disturbing economies of many countries. Under this system we find that exchange rates were to be changed if both member countries and the European Commission were in agreement. there are countries which are not member then how come those countries will benefit from this system. global economic crisis of 2008-2009 made it evident that such system is not effective and instead of balancing inflation. this system promoted more disparity and inflation.
Response to third question-
I agree with that Cryptocurrency can be future because It is more secure way of payment. Countries and people will not have to face bank charges and transaction cost would be low. If government support this currency then many countries will adopt doing business with this currency. Yes, Libra can be blockchain tech like bitcoin because of its high liquidity and Reserve of assets made up of cash or cash equivalents. this could be like making money out of libra assets with use of blockchain technology.