Class Discussion Essay Example | Topics and Well Written Essays - 1000 words

Class Discussion - Essay Example The only way to eliminate the problem and develop financial globalization is by creating a common worldwide currency (Mohan 39). This paper will discuss why a global economy requires a global currency. The movement of capital and goods across country borders is accompanied by inevitable transaction costs and commissions (Bonpasse 189). Having a single currency minimizes on these costs and improves trade efficiency. Increasing volumes of trade and investments across borders creates a strong partnership between exporters and importers around the globe. Both parties would be beneficiaries of a common currency. Two or more countries trading in the same currency are likely to conduct trade up to three times more than if they were using different currencies (Bonpasse 204). Globalization of currency makes the world an optimal currency area as economic integration makes countries react and adjust in similar ways in their responses to external trends. The closer the trade links countries have , the more related their business cycles are. Therefore, currency convergence may lead to an increased flow of international trade. Multiple currencies also imply uncertainties, because traders are not always quite sure what foreign goods will cost, or what foreign buyers will be willing to pay for their products. At the same time, as globalization grows and volumes of international transactions rises, both independently and in comparison to the world output, the cost of having multiple currencies also goes up (Bonpasse 241). As posed by a research conducted in the United States, most national currencies are a trend of the twentieth century, and international, cross border currencies are the best solution for the future (Hausmann 96). The researcher provides that in the broader perspective, farmers in Africa will be able to get equal pay for their produce as farmers in America, and laborers in Asia will also receive the same pay as their peers around the world. A positive effect of having a global currency is the reduction of the gap between the rich and the poor. There is evidence pointing towards the forces driving the globalization process, in relation to wealthy countries, indicating that they are narrowing the per capita income gap between themselves and the globalizing nations (Aart 103). For instance, India, Bangladesh and China were among the poorest nations in the world a few decades ago, but they have significantly influenced the narrowing of worldwide inequality, thanks to their economic expansion (Aart 104). In an era when international interdependence and integration in trade and economy are on the increase, a standardized and universal system of currency will be among the various complementary measures that will assist in simplifying and facilitating interaction and understanding among the nations (Mohan 76). A single, common currency would serve like a global language, enhancing communications around the world traders. It would eliminate the cur rent difficulties presented by speculation, instability and uncertainty. It would also provide a strong foundation for installing and growing a global economy. It would significantly reduce the cost and risk of doing business internationally. Within the present trading system, more than one trillion dollars are traded every day as investors seek to get best returns with the least risk involvement (Mohan 89). This movement of