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The Best Money 3 - Politics - Nairaland

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The Best Money 3 by lawani: 11:35am On Apr 16, 2016
When a currency is devalued, what it means generally is that the central bank of the nation in question has printed more of it and passed it into circulation, so since if more of anything is in circulation, it will lead to a drop in value of that thing (this holds true for everything), such a course of action (printing of money) leads to a drop in the value of the currency in question.


WHAT ARE THE EFFECTS?


The main beneficiary is the government of the country devaluing its currency because they take ownership of the newly printed money which is legal tender in that country.


The second beneficiaries are debtors who borrowed money at the old value. They are beneficiaries because the value of their debts is now reduced without them paying anything out of it.

The third beneficiaries are the business owners because more money in circulation means inadvertently that business will move faster and they will be able to grow faster but they would actually have grown anyway. If you are in business, you are bound to grow. So business owners are not really beneficiaries.

We can therefore say the only two beneficiaries are governments and debtors. Government, if a good one, can use the money garnered to improve the country but that is not often the case in many countries where the funds are just looted.

However if new currency is not printed by the central bank of a country, there is no reason for the currency of that country to drop in value. No reason at all. Except someone can explain that reason to me in simple English.

So the reality, the fact, is that if no new currency is printed except to replace old notes in a normal country where the budget is financed by taxes, then the value of that currency will continue to rise steadily and prices of commodities will drop steadily along with it especially when the population of that country is increasing increasing demand for money . That is the truth that can not be controverted by any Economist. However, the only thing that can upset that cart is an epidemic wiping off a good portion of the population.


What I believe is the solution to currency irregularities across the globe is to stop governments from owning new money, if new money is made, it should be distributed by lottery or shared equally to all adults, so government will not have the incentive to arbitrarily print money.


Then if currency is being inflated, it should be at rates proportional to population growth rate and economic growth rate as a standard. That way, an end will come to runaway inflationary trends.

Another way might be to inflate all currencies at thesame rate or at rates approved by a UN body created for that purpose. This might be in form of a global currency, if in that form, it will remove the forex market from existence, since all currencies will be thesame even if not thesame design, values will be thesame especially if it is agreed that new money should be introduced at a uniform rate in spite of non uniformity of economic factors.


Throughout the period from the 15th century to the 19th century and before, there was no forex, no money used for international trade. Some nations backed their currency with gold in what is called the gold standard which was jettisoned in the early 20th century, so in that wise, we may say gold was the universal money to some extent but in West Africa, not everybody agreed on that. Some people traded with Arabs in gold, but generally Arabs loaded their caravans with salt to sell in West Africa and returned with leather, gold, indigo and etc. So West Africa was basically exchanging gold, leather with salt and etc but farther South like among the Ijesha, Benin and etc, they did not trade in gold viewing it as wrong, they used the cowry shells or owo eyo which is a fiat currency, a shell gotten from the ocean hence the money is called Aje Olokun with the Olu Okun seen as the custodian of wealth. Cowry shells were picked up for free on the beaches unlike gold that is mined. Manillas were also used in parts of Eastern Nigeria, like gold, it is also not a fiat currency. Everything was abandoned during the colonial era for the gold standard and initially all currencies were backed. They were all certificates representing a certain weight of one precious metal or the other and you could return the cash and demand to be given the metal. However all nations have abandoned the practice of adhering strictly to that. So nowadays, a central bank might have 100 tonnes of gold worth 200 million dollars at market rates but thesame Central bank might have 4 billion dollars in circulation implying that the currency is 95 percent empty and central banks of nations are free to go to any percentage of empty unlike before when all currencies were backed with real gold or precious metals. This is the meaning of currency devaluation and the meaning of Keynesian economics where central banks are free to inflate currency without restraints. Only the Olokun (Iba o!) could inflate currency in Yoruba land in the recent past before European merchants brought cowries from other places and collapsed the system. So the reader can determine which system is best easily. It is easily seen that cowry shells is better than gold as it does not require mining and it has no intrinsic value, it is just a tool, a medium of exchange while the glorification of gold has caused its meaningless hoarding by central banks. Central banks still hoard gold today, millions of tonnes whereas gold ought to be used for only jewelry and industrial purposes and not hoarded.


SOLUTION


One may want to say there should be a Return to trade by barter between nations that currency be printed and used only locally, and it should be fiat and not backed currencies, modelled after the cowry shell but the new Olokun will be the Central bank under strict control. It looks solved until you consider that it is now a global village where I can stay in Nigeria and buy something in the US or China. In the 15th century that was not possible. So since people in Yoruba land in West Africa will need to spend their money online to buy things in the US or China or to send to their wards in those places, it means the global society will still need the bureau de change operators if there is a littany of Central banks across the globe inflating local currencies at different rates. So apparently the best way forward is what Europe has done which is to unify all the Central banks, cut out unnecessary forex activities and institute a single currency acceptable everywhere across the globe, a currency whose inflation is controlled by the UN, the way the EU controls the inflation of the Euro.


In the past, there were no bureau de change, changing one currency to the other. Currencies were used only locally. If a Nigerian was going to Britain to buy things in the 15th century, he or she will not go with cash but with Nigerian goods or products to sell in Britain collecting British money which he will use to buy British goods to resell in Nigeria at a profit. He or she will be the one to know how to create a profit margin. For example if I loaded cargo and paid freight charges and expenses totalling 10 million naira, then the British goods I am reselling in Nigeria must bring 15 million naira to give me a 5 million naira margin. It was a sound arrangement but instituting a global currency is better since we are no longer in the 15th century and it is now a global village.

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