Common Cents

Trade Weight

Ralph Murphy

(11/2018) Foreign trade relations involving flows of goods and services are one of the most important bonding elements of external policy concerns. Discretionary income voluntarily surrendered for those purchases affords a key indicator of social want and need both to internal markets and points of connection abroad. Trade can be helped or hindered by domestic planners and programs which manipulate conventional understandings or lack guidance directives to include foundational left or right theory. A system of shared global currencies is breaking down amid theft opportunism and poor planning all of which could easily be avoided with more effective standards to that process.

When dealing in foreign trade there are two main issues that routinely dominate policy concerns those involving the import or export restrictions as well as linked capital movements tied to them or importantly independent of them as foreign direct investment. A capital account assesses the balance between the trade items but also includes the cash flows within a specific period of production semi annually or annually to host markets.There is a presumed value tied to the host currency which must be maintained or predictable for the foreign markets to optimally function. Unfortunately to especially developing nations inflationary pressures as money that outpaces actual new production dilutes the currency value and often curtails or terminates trade that could be afforded through better planning.

The United States Dollar (USD) is now used in over 60% of foreign trade transactions as it is relatively stable in value. The actual amount of the currency available for conversion to domestic exchanges is vague but clearly over $5 trillion. It is followed by the Euro that moves a potential 25% of the transaction medium mostly to European members. There are others as the Japanese yen but they seem of marginal use at less than 7% the trade interest or are pegged to the dollar.

Euro dealing closely linked to their colonial affiliations and other regions to include former French West Africa whose nations peg it to their host currency. In the dollar case it circulates in Latin American nations as Ecuador. Panama, and El Salvador as well as southern Africa’s Zimbabwe as the host currencies. That phenomenon followed periods of extreme inflation as policy planners opted overprint amid debtor other pressures and debased their home monetary units. Obviously it wasn’t reversed with relative stability that followed.

Sharing of a single currency by differing nations is a relatively new concern on scale as there seems real conflict of interest as to the altruism or competence of the issuing authority.19 nations in Europe are banded by the Euro trade currency market that was managed through the European Central Bank but heavily reliant on New York players as Goldman Sachs which pulled interests amid policy review of shady deals and gross program theft.

The trade interests are easily managed if the domestic value of each host nation remains constant. It does if the monetary authorities match new money with new growth. It doesn’t when planners pay off internal program debt with simple overprinting or skim it for personal use. The latter is perceptible but the overprinting flouts conventional survival need and is generally far worse. Venezuela is a near term concern of it with annual inflation reportedly over 2 million percent.. Planners there and elsewhere may then outsource the solution to others causing political unrest and likely trade loss to the presumably helpful broker.itcan be avoided by realistic standards linked to need.

Developing nations which rely on the USD or Euro often surrender internal trade reserves to commercial banking networks which can be foreign but are included in the hosts reserve accounts of cash available for foreign transactions. The foreign banks deal with the locals who are subject to the host monetary authority and who often direct arbitrary home monetary levels to the point where external trade is controlled by the foreign currency. That scenario could easily be avoided if again the host just maintains a predictable currency value and affords a mechanism for sought transaction money with an external partner who does the same by whoever’s bank At that point trade issues are political decisions on barriers or affordance tied to want and need in the current account of exports minus imports plus foreign direct investment.

With predictable values commercial trade policy could put the objective of interests on transaction needs, in the dollar case not juggling them in unpredictable form. There would be fewer middle men, costs, and less unscrutinized control. Europe’s a bit different. The Euro has controlled or dominated relatively major world markets to Western Europe in an unlikely bonding of historic antagonistic or even openly hostile peoples with the policy objective of facilitating trade.

The currency is not responsive enough to internal markets better served by host planners and seems to afford cross border transaction opportunism of officials they couldn’t have entertained domestically given other interests tied to the monetary provision. Even in the troubled European Union alliance plagued by strong arm pressure to join it, many nations opted to maintain their own transaction means to currency issue. It’s been used since about 2002 to most members but again lacks backing, popularity and successful precedent and also seems destined to historic review as a poor alternative to host control of that need.

Money should serve to facilitate trade not be manipulated for speculators tied to an issuing authority. Its economic impact should be limited to trade not as an investment return of itself. The value should be standardized to domestic accords and trade out of nation and be predictable by that simple need as well. If value drops with overprinting the reason is most likely manipulation rather than need and should or could be legally addressed as it is an avoidable and costly concern.