Does plastic money help?

Recent development in the currency market is the introduction of plastic notes. It was first initiated by Australia and then copied by many other countries successfully including New Zealand, Vietnam, Singapore, Chile etc. Plastic notes are known to have a longer life and reduces the cost of printing new notes very often by the respective governments. Some people argue that plastic notes are like monopoly notes that look like gaming notes and some smear that traditional paper notes are the real ones.

We have also seen that these plastic notes are hard to fake and are widely being adopted by many other economies. Saying that, it wouldn't be long for anti-social elements to find a way to fake these notes as well. One thing we hear very often these days is that USA should adopt plastic notes as well in order to replace their widely disgraced $1 notes from public usage. Though it is getting a wide popularity, the US government is still hesitant to put its foot forward and try to change to plastic notes any sooner.

In my opinion, plastic notes are the way to future and my kind advice to USA is catch up fast with the world or you will be left alone. Just to mention here that India has recently announced that it will be introducing plastic notes soon. Seeing this we are left to wonder what is USA still doing out there?

Why do we need a universal currency?

Recently we hear often, the voice to introduce a universal currency or a united nations currency as the need to maintain the stability of the stock held by most of the nations raise. Is this possible and will the united states allow its currency to be dropped or replaced as a reserve of most of the nations?

Firstly, let us analyze the cost of introducing a universal currency for reserves kept by different nations as a bail out or backup for future uncertainties. Currently USD is used as a reserve currency in many countries. This has been seriously challenged by EUR in the recent years. One of the main reasons why USA takes no initiatives to implement this at the united nations is that USD has gained a strong and stable position in the global market due to it being considered as a reserve currency by many countries of the world.

Secondly, without doubts the initiative to bring out such a currency will involve huge costs and efforts that might have to involve all the  members of the united nations. Thirdly, such a currency will replace the domination of USD over many many years.

Now let us see how a common currency will help our economies. Firstly, a stable currency will help all the countries to keep their reserves at the same exchange and avoid fluctuations. Secondly, a common currency will make it easy for taxation and movement of goods over different borders. Thirdly, investment by various countries together to avoid faking the currency.

In my opinion, even if it doesn't happen immediately, there will be a time in the future when all nations would change to a common currency for reserves forfeiting all the problems in it.

Did we learn anything from Zimbabwe?

We all know that for the past one decade Zimbabwe's currency has inflated to such an extent that the country had to freeze them and start using USD and ZAR. Analyzing what has happened, did we learn our morals here? or did we leave it unassuming, as this trouble didn't reach our shores? Well, I would say that we as a community (All countries included) are negligent of the seriousness of this issue. If it can happen to one of them, it can happen to us. Let us start with the basic question that how did it ever get to a stage that Zimbabwe had to print millions, billions and trillions?

Countries like USA and its aids (including my own country that I love the most) kept lending despite knowing that the country was in no state of returning the debts, after which also started to pressurize and lead them to squeeze themselves to return a high interest rate. Whereby, with no alternatives, the bank of Zimbabwe had to print, manufacture, churn out (however we call that stuff!!) millions, billions and trillions to meet their debts. When the market is inflated by too much currency, the value of the currency automatically flips down (basic economics - supply and demand).

If we say it is the countries that lent money to Zimbabwe that were responsible for their hyper-inflation (I call it super-inflation), we are missing the other part of the story. Let us be fair here and also look at the other side of the story. Zimbabwe's governance has been very poor for decades now and is one of the badly managed economies of the world.

With un-employment at its peak and with zero plans for their debt management, the bank of Zimbabwe decided to meet its debt with one of the worst decisions ever expected of them. yes, guess what? they decided to print millions in new currency to meet their debts and the consequence? we know what has happened now.

It is a wake up call for the country itself (Zimbabwe) and every other country that was watching them and doing nothing to stop it. To those countries (including USA) who think the cleverest way to meet international debts and trade deficits is to churn out more money from the machines, "for god sake do learn from this case" and hopefully should never happen again.

Unreliastic exchange rates

The exchange rates between CNY and USD that are pegged with unrealistic values has become a major controversy in recent times. One major question that everyone has started asking is, who controls these exchange rates?

Well let us start by saying that money markets around the world follow different regimes and techniques. We will analyze these in a separate article, but for now let us view it from the eyes of United States of America.

USA follows differential treatment to various countries based on its "blind view" of the country and its historic (Prehistoric!!) relationships. It also has dual standards when it comes to acceptance and trading norms. Without moving away from our topic today, China on the one hand sets the value of its currency suiting the "day need" of its economy and US on the other, supports some countries that peg its money with US back-up and pressurizes some countries like China to change its value based on the trade differences and needs of its own purposes.

As a common man, we can say that both economies here are not innocent and pure from need based set-ups. Well just to be neutral, it is good for us in some cases that China purposefully suppresses the exchange rate on CNY and some cases untrue pegs lead to pitfalls.