establish a EURCHF floor at 1.20 to protect it’s local economy and avoid a breakdown of it’s domestic industry and production.
At the same time world news papers and other media are reporting and speculating daily upon the possible break down of the Euro! (Which begs me to ask, Who are the real speculators?) Te paradox being that now the Swiss National Bank itself has indirectly joined the EUR, (at least for the next few months) seeking ways to stabilize its strongly European linked economy.
After the end of the Second World War and in particular during the ‘70s and ‘80s the US currency played its world dominating role driven mainly by being simply the, ‘Petro-Dollar’! Promising political stability and trust, it finally usurped the British Pounds dominance as the previous world-leading currency. In the past two decades the world’s economy has become globalized due to which an enormous market, far bigger than that of the so-called ‘developed countries’, has emerged.
New legislative responsibilities
Tis calls for a new order and new legislative responsibilities taken on by politicians at international level. China is fast becoming the world’s biggest manufacturer and is on its way to playing a dominant future role in innovation and sophisticated development, in line with other Asian states. Russia has to be considered, being by far the world’s largest holder of natural reserves, with enormous growth potential in infrastructure and production! So, clamping down on the USD and EUR for covering over ninety percent of the financial business (in particular in FX) is frankly, grossly negligent.
Of course no one had foreseen the strong rise of China during the last decade. More to the point it is the right time, (remembering: i) sovereign debt crisis, ii) EUR discussion, iii) USD weakness, iv) hoarded currency reserves, v) protectionism of the RMB, vi) appreciation of the CHF, vii) explosion of the gold price etc.), for serious discussion and propositions at an international level and with the lead of the IMF, obliging other countries, such as China and Russia to take over increased international responsibility in the financial markets (payment systems, paper market, free float etc).
In the end, there is no way of excluding or freeing them. Of course, domestic and international systems, will need time to adjust. But all our markets need clear words and declarations to help fill the vacuum of leadership.
Call to politicians
It is vital, even though sometimes being an enormous burden, that we all continue to have on-going discussions on OTF/MTFs, Trade Reporting, FX Data Repositories, MiFID, Financial Transaction Tax, Basel III and so on, even though there are obviously some different standpoints between Europe and the US, and challenges to be met in gaining cooperation from China and Russia over many of these themes.
Te call is out for politicians to look beyond blaming the industry concerning what is or what went wrong. Te call is out for them to provide a political environment, in this closely linked world, where decisions and developments are based on sustainability and harmonization, under responsible leadership.
october 2011 e-FOREX | 23
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