Movement is afoot to implement a system of, what can be described as, new taxation on each financial transaction worldwide. This move, as a consequence of the global financial crisis, is primarily aimed to curb speculators and hedge funds activities but will also have a direct effect on productivity as longer term financial paper is expected to become more attractive. This tax rate across countries, not on internal country transactions, is basically to be managed by, the last reserve bank to all central banks, the International Monetary Fund (IMF) as it increases the number of currencies it uses for its base currency calculation. Yes, a single currency for all international transactions.Essentially the IMF's de facto currency is presently based on the US dollar, the yen, the pound and the euro. This move will see that base change to well over two hundred and fifty currencies. Removing the relationship many lesser known currencies currently have to those stronger economies. All national currencies will be weighted by the IMF based on current economic factors and only priced to and against this new global currency. Hence, taking away the fixed or floating currency valuation decision from national Governments or other monetary policy institutions, resulting in all foreign debt being held in one currency and ending currency hedging.
Speculating on commodities, stock and bond prices will be essentially taxed at a higher than normal rate, once any foreign component is in the mix, making these activities much less attractive to investment funds. This will result in slower activity on all exchange markets, strongly considered investment decisions and a general cooling off in the global financial services sector. Avoiding this tax, which will be used by the IMF to expand its ability to assist poorer nations via its well-known loan program, will encourage economic groupings bringing nations with clear synergies together under one currency.
Directly investing in productive activities will become more advantageous, while trading in goods and services will be cheaper in the home market. For example, extractive industries (Drilling & Mining) will see the benefits of training locals at all levels (workers to managers) to maintain its competitive edge, because this currency tax will make it more expensive to import rather than produce. While exports from these industries will remain market driven, small nations can benefit from being part of an economic block with the producing nation. This foreign currency tax will clearly encourage buy local campaigns.
Tourism and foreign investment will also benefit from a non-speculative global currency. One can compare apples to apples defined with a common base. All accommodations rates, airline, taxi and tour fares and all commodities, stock and bond prices quoted in one currency for every consumer in the world to see and understand.
Rationale
T.A.J & Associates Company Limited uses this occasion to comment on topics that have been covered, both academically and by the mainstream media, to add its opinion and point out investment opportunity, not to invoke any social action.
