Free World Economy

Free World Economy

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In Money, Markets and Sovereignty Steil and Hinds argue that globalization is beneficial for all but because of the uncertainties of the current monetary system governments and globalization clash as governments work to protect their currency. They argue that because of the perceived stability of the dollar the in order to create the most open and prospers economy developing countries should use the dollar in favor of the local currency (131). They show the historical benefits of using the gold standard instead of paper (fiat) money but they also show that it unadvisable for the United States to go back to the gold standard at this point in time (68).
Steil and Hinds argue that if a developing country really wants to integrate into the world system they should stop using their local currency instead use the dollar or euro. This is a currency the locals want because of the stability this will bring an end to the countries monetary sovereignty but will lead to economic progress in steil and Hinds eyes (130). This opening of the countries’ economies will lead more investment in the country as investors no longer have to fear the rapid changes in value that is associated with currencies in developing countries. In these countries multinational corporations can find lower production costs and help bring the economy into the world market (111). Countries that have opened there economies to the multinational corporations and outside investment have had their per-person GDP rise which they argue is a great thing (115). This is in comparison to a country with strong monetary sovereignty and closed economy which they call a “dead-end street” to prosperity (115).
Steil and Hinds argue that money came in to use in the world not by the will of governments but by the will of merchants, then when governments too charge of issuing the money it was usually for personal profit and they routinely changed the value of the money to tax the people using it. (66-67). They also show that the idea of fait money (paper) that is not back by something valuable (gold) is a relatively new thing, the United States got of the gold standard in 1971. The historical gold standard they show to have little inflation and very few on the problems with modern currency that’s value is in the trust placed in it (105). As the main currency in 18-19 centuries the British pound sterling is good example of what was so great about having your currency in gold.

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The pound was valued in a set amount of gold which the monetary authorities preside to buy it back for. The domestic circulation of the pound was in gold coins of the correct weight or of paper bills redeemable for the stated rate. The people were free to change their coins in bars that did not have the government stamp. The government could not stop the trade of the coins or bars outside of the country (154).
They argue that the dollar even with all the imperfections it has now, like not being tied to the gold standard it the best viable option for helping create a stable and “free” world economy. If the dollar was going to do this and maintain the trust that has been given to it by the world’s investors and the like. In order to do this the Federal Reserve which is the government agency the controls the world’s supply of dollars would need to implement some changes to how it conducts its policy. There mandate would need to be expanded to keep the dollar in a position favorable for international trade which could be bad at first domestically. This in the long run they argue will maintain the importance of the dollar which they argue will in the future allow the Federal Reserve to help fix the United States economic problems domestically, something they say it will lose its ability to do so if the dollar stops being the world currency (246).

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