Problem
Speculation on money markets
Other Names:
Exchange rate speculationForeign currency speculation
Uncontrolled power of forex markets
Nature:
Currency traders derive their income from volatility, namely the swings in the value of currencies that are bought and sold.
Incidence:
Foreign exchange markets daily turnover was almost $180 billion in 1989. Only about 20% of that daily business is concerned with paying for imports and exports, the rest is speculative. In 1992 a new study in the UK indicated that dealings had reached $1,000 billion per day, namely 50% more than in 1989, only a small fraction of which was linked to actual transactions over goods or services. A mid 1993 study estimated $350 billion circulating through the foreign exchange market on an average day. In July 1993 the French government unsuccessfully attempted to defend the French franc against an attack by speculators in an action which virtually eliminated its currency reserves and left it deeply in debt to the German Bundesbank. The action is estimated to have cost 300 billion French francs, resulting in a debt of 150 billion francs.
Broader Problems:
MoneyismCapitalist speculationInstability of the world economy Related Problems:
Commodity speculationUS dollar dominance of world economy Aggravates:
Exchange rate volatilityForeign exchange monopolyMisalignment of currenciesSpeculative flight of capitalForeign money liabilities Strategies:
Controlling currency speculationRevaluating currencyTaxing currency speculationEnhancing independence of forex marketsSpeculating on currencyStabilizing currencyDestabilizing currency Subject(s):
Commerce → Commercial exchangeCommerce → Currency
Commerce → Investment
Commerce → Market
Commerce → Money
Cybernetics → Control
Society → Foreign
Related UN Sustainable Development Goals:
Problem Type:
D: Detailed problems Date of last update
04.10.2020 – 22:48 CEST