Telematic currency and market strategy (mtemuk.pdf). - Centre d ...

The first problem was the submission of the countries considered «weak» to the countries considered
«strong». In fact, when a geopolitical society has a deficit in its trade balance, there are only two possibilities:
to have recourse to international credit or to its currency reserve. If the deficit belongs to a geopolitical
society producing reserve money, this society can actually finance its deficit by means of new monetary
emissions.
This was in fact the case of USA. The USA have taken advantage of their privileged monetary position up to
the limit of their possibilities, by reabsorbing enormous deficits in their balance of payments through the
uncontrolled emission of dollars. It must be pointed out that the origin of this deficit was not an excess of
imports, it was an export of capitals not backed up by a corresponding entry of merchandise.
The USA policy of financing their deficit originated such an inflation of dollars in Europe
(export of inflation), that the convertibility of the dollar, under the point of view of official
standards, established in Bretton Woods, was jeopardized. From 1967-68 inconvertibility
became a fact, even if it was not officially declared until August 1971, when president Nixon
denounced unilaterally the Bretton Woods agreement.
Since then, in spite of the attempts to find a readjustment according to the Washington agreement of
December 1971, -also unilaterally denounced by Nixon in 1973- the gold exchange standard has been finally
abandoned and, at present, the currency exchange is considered «floating», that is there are no fixed standards
and they are negotiated in a money market. Therefore, there is no reference to a possible convertibility to
gold.
Currency floatation is in itself no ill for foreign trade. From this point of view, the present situation would
not be especially serious if it were not for a fundamental fact: as long as the domestic currencies of every
geopolitical society are not rationalized, foreign trade will not be rational either, and therefore it will not reach
the necessary equilibrium of balances, which should be its main goal.
It is impossible to have an equilibrated foreign trade as long as:
a. money units of the strong countries are imposed on those of the weaker countries. In spite of the
crisis, the dollar has been able to bear the situation and still today it holds a pre-eminent position and
privilege which allows all its domestic money problems to be exported.
b. there is still a speculative currency market. This has a capital importance. The possibility of
exchanging a currency for another, without a parallel movement of goods, promotes greatly the purely
speculative operations. When they are made on a great scale (erratic movements of capitals), they help
to reinforce the existing money imbalance within each geopolitical society. They corner national
banks and compel them to take external actions in order to keep within reasonable limits their
currencies' standards. As always, the ones more injured are the weaker ones, both on a world level
and in each domestic society.
5. Functions of the money system today.
We are now in a position to draw the final conclusions of the analysis we have developed on the money
systems.
With respect to the nature of the money systems, their present forms show more than ever their fundamental
abstraction. The historical clash between nominalism and metallism has been largely won by the first one,
even if the references and the defense of metallist theories still hold an interest in many books and writings
on this matter. However, most of the critics admit now that the money system is a simple auxiliary instrument
without any need to have an intrinsic and concrete value. We need only remember Schumpeter and Lord
Kaldor.
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