Global Financial Crisis (Global Crisis Series)
There has been a recent decline in the global financial system as many countries are facing a severe financial hardship, high unemployment, and a decline in currency value. The global market relies on each country to import and export goods. This is needed to sustain the global economy. When one or more countries are not able to contribute to the global economy, then the impact trickles down to the rest. The global financial system is a balance that must be adjusted according to supply and demand. When a country begins to suffer a financial strain, then the chance of inflation increases. This forces other countries to adjust their monetary value to stabilize the market. These types of actions create the possibility of a crash in the financial system, as countries loose value in their currency.
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Many countries are facing extremely high unemployment with little sign of recovery. In most of these countries, much of the unemployed is the younger workforce. Most are college-educated with new degrees freshly looking for work.
According to the international labor organization, “The ILO projects a global unemployment rate of 6.1 per cent, equivalent to 203.3 million unemployed, through 2011, as the labor market registers a highly differentiated recovery with persistently high levels of unemployment and growing discouragement in developed countries, and employment growth but continued high levels of vulnerable employment and working poverty in developing regions.” UN reports. (2011)
The global job market is showing little improvement and the recovery in most countries has stalled. High unemployment contributes to higher deficits and less tax revenue collected by governments. This, in turn, creates the financial instability that could create a global financial crisis.
Unemployment has a diverse effect on the population and businesses, as it slows the economy. The countries that are facing high unemployment pose the greatest risk of collapse and I think, in the end, this will cause the global financial system to crash. As unemployment continues, the governments will have higher deficits, which will decrease the value of their currency.
When a government deficit increases past its ability to repay its debts, then the value of its currency begins to decrease. Once the value falls below a certain level, then the currency becomes obsolete. The International Monetary Fund (IMF) is based upon the United States dollar. All global currencies are based upon the value of the US dollar. If the IMF replaces the US dollar with another currency, then the United States would no longer be able to print money. This would force the government to adopt a new currency and eventually create a “one world currency.”
“As a result of the global economic crisis in 2009, both China and Russia have urged the governments of the world to consider a one world currency. The current standard is based upon the US dollar. In the 1990’s, the Japanese Yen was rivaling the dollar. With the economic decline that hit Japan soon afterward, the Yen dropped out of the picture.” Will Gold be the New One World Currency? (2010).
The time it would take to transition from one currency to the next would cause a global crisis, as people would not have the ability to buy or sell. There are many problems that would be associated with the formation of a one world currency. Some of the problems are: “Any currency, including a single world currency, can be debased. But more importantly, if too many dollars are being pumped out, people can start holding other currencies such as the Euro. If businesses and people don’t trust the government issuing a particular currency, they can write contracts in whatever they want. With a single world currency, there is nowhere else to go. As a general rule, competition is good — and money is no exception.” THE WASHINGTON, T. (2009)
While a financial crisis on a global scale will more than likely cause the introduction of a one world currency eventually, as countries spend and borrow more than they can repay, it is still uncertain if a one world currency will be the best possible solution for the world. Although it may solve a temporary global financial crisis, the long-term effects are still unknown.
Image Credit: Occupy George