The Currency Market is Excluded from the Productive Economy

Taking into account the fact that the world population for four decades increased from four to around 7.5 billion people, that for what 1975 could be bought for 100 dollars today should allocate at more than 450, and that the price of a barrel of oil then stood at about 13 dollars, there is no formula which could carry out a factor that makes the worth of anything increased much more than 500 times, as it is the case with the currency market.

If the early seventies of the last century currency exchange used solely to simplify international trade, another imposing figure is about the size of this market is that the foreign trade transactions in foreign currencies amounted to only two percent of world currency exchange.

Inflation Calculator data shows that, if the completion of major oil crisis in the seventies it took 200 days to exchange on the foreign exchange markets reached a global level of annual world exports. The level of world exports, which since the beginning of the seventies to the present quadrupled, has a turnover in the foreign exchange market of 84 hours. This is one of the key indicators that the currency market is excluded from the productive economy and world trade.

Over the past several years, four leading banks of the world controlled half of the world market – UBS, Citigroup, Barclays and Deutsche Bank and when they join the six other powerful banks, including Morgan Stanley, Bank of America, JP Morgan, Royal Bank of Scotland, HSBC and Credit Suisse, that will lead to coverage to 80 percent of the foreign exchange market. The remaining 20 percent controlled by the smaller banks, and only a tenth of this free part refers to transactions in export to international markets.

Half of the traffic takes place on the London market, where the scandal of manipulation of Libor has not been solved completely. However, fines for furnishing at Libor amounted to “only” 5.8 billion dollars, much less than what would, if proven, could pay the bank responsible for the impact on the exchange rate difference of the euro and the dollar, as the only daily volume of their mutual exchanges amounts to 1,300 billion.

In the meantime, it is more and more often possible to hear the warning to be among those responsible for manipulation could find and the Bank of England, from which since the spring of 2012 began to arrive alert large investors, which lead to the realization of transactions in a very short time, before what would any official information remained available in the mainstream media. Countries that are largely trying to overcome this problem, trying to maintain control over all available mechanisms are certainly members of the Eurozone.

Clearly, a set of convergence criteria on the basis of which enables the use of the euro as well as the rigorous procedures of the European Central Bank and its restraint of conduct aggressive monetary policy are just an attempt to keep control in this area, however, the competing interests of banks whose headquarters are outside of the beneficiary countries of the euro, but and the governments of the countries where the problems of the Eurozone, is not the only concern that overstate these restrictions.

This article is part of the academic publication Dividing by Zero by Ana Nives Radovic, Global Knowledge 2018

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