The Economic Dragons Threatening Our World Research Paper

The Economic Dragons Threatening Our World - Research Paper ExampleOffhand our exercise looks easy, simply it is not, and this judgment has less to do with the dearth of facts than with the basic givens. A rich East Asian solid ground with a pegged currency fixed to the US dollar for ten years, supported by a fiscal policy of tight capital outward flows and unrestricted inflows is experiencing an upward pressure on the exchange rate. The scruple remains what to do now? Deciding on a strategy depends on a sporting understanding of the worlds financial system, the role that exchange rates play, how they are determined, and what will clear if we do nothing. As Robert Solomon said (1977, cited in Samuelson, 1992) The worlds financial system is like the barter lights in a city, taken for granted until it begins to malfunction and to disrupt peoples livesA well-functioning monetary system will facilitate international trade and investment and smooth adaptation to change. A monetar y system that functions poorly may not only discourage the development of trade and investment among nations merely subject their economies to disruptive shocks when necessary adjustments are prevented or delayed. The worlds monetary system refers to the cook of policies, institutions, practices, regulations, and mechanisms that determine the rate at which one currency is exchanged for another (Shapiro, 1996). It is the coordinated way severally nation manages its supply of money so that we can buy and sell each others goods, doing business by exchanging pieces of paper, the value of which we agree on called money.