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International Business: Foreign Exchange - Essay Example

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Since the establishment of the Bretton Woods system in the late 1940s, the United States dollar has set established as the international currency or exchange. Although it is inherently true that currencies are often traded without trading the dollar, this dynamic is one that…
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International Business: Foreign Exchange
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Download file to see previous pages This is obviously a relevant and extraordinarily important issue for the reader to consider; due in part to the fact that the power and wealth of the United States is predicated upon the US dollar remaining in the position of the currency of foreign exchange and international reserve. With this in mind, the following discussion and analysis will be concentric upon discussing the reality and gravity of the threats to the current system and what likely outcomes and potential impacts this could have at both a systemic level as well as a more localized level for corporations interested in maintaining relevance and success within the current market space.
Currently, both the Russian Federation and the People’s Republic of China are in high-level talks with regard to stepping away from the United States dollar as the global reserve currency and potentially establishing a new system that would bypass this long-standing legacy. In the eventuality that these talks are constructive and the combined economic power of these two extraordinarily powerful nations is able to craft a new global monetary system, the overall power that the United States might otherwise hope to affect around the world would be drastically and immediately reduced. Essentially, the United States has been able to exhibit nothing short of a monetary monopoly over the past 65 years (Hong, 2013). This monetary monopoly has allowed for the United States to engage with developing nations, set the interest rate upon which loans will be paid, and ultimately determine what resources around the globe should be priced at (Schuman, 2014). Whereas the free market still works within this particular scenario, the ability of the United States economic system to be a price maker as compared to a price taker is indirectly and directly impacted upon as a direct result of the dollar ...Download file to see next pagesRead More
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