By the 90’s we slowly began to visualise a slumping American economic power. The USA maintained such a monopolistic supremacy over the world that they belittled the rest of the economies in size and policy execution. The financial crisis waded its way into the limelight and crippled the giant to re-scale its race, this time with Asia.
Monetary economics has failed to prevent this slump from happening as this is a case concerning a lapse of functional collaboration between the bankers that has surmounted to this ineffectual battle against recession. Laissez-faire among banks has proved to be a baboon congress. Timely interest rate manipulation or for the least any monetary participation by any regulatory authority, be it, the Govt. or the monetary authority could have possibly averted such a slump.
‘Dollarising’ the world market has become the bane and the carrier of fiscal upsets. From the fall of the Bretton Woods System between 1968 to 1973 after the Nixon Shock the global economy unshackled itself from the dollar and moved to full convertibility on a floating exchange rate model that was also adopted by many countries. The floating exchange rate model still maintained an American Dollar hegemony over international trade where most countries accept dollars or gold against any barter as in a floating exchange rate the value of the currency is determined by the demand for the currency. The steady demand for the dollar helped it maintain a ‘near global currency’ status.
The year 2008 spell the doom as the cracks in the economy lay exposed and wounds, we saw, do not seem to heal for a long time. Though the value of the dollar remained unshaken but the demand for it definitely has been. It is due to the rise of Asian economies and due to globalisation that figuratively tend to pose a threat to the longstanding leader. Tiger economies , The BRICS, ASEAN etc., just haven’t been the brouhaha but have played the skyrocketing speeds in economic ascendance. This has given the dollar a demand-shake and these countries slowly start to move away from the standard “near-international currency” that the dollar is. Oil economies snailing towards considering payments in gold, yuan, rupees…. This will soon jet towards a move away from the dollarisation.
China has already been voicing the need for a supranational currency and IMF too is beginning to lean towards such an approach through SDR’s (Special Drawing Rights) ,the Indians are already persuading the Iranians to accept rupees for oil. International Currency like the ‘Bancor’ if implemented roots out the deficits of the US economy, discourages the hoarding of dollars as reserves and cycles the global economy towards prosperity.
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©The Idea Bucket, 2012. (Submitted by team-member, Mikky.)