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Global Political Economy - Essay Example

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The paper 'Global Political Economy' presents the United States which allows Canada to back up the dollar with the gold-based reserve system because of the benefits inherent in such systems. Too big with, the system uses a fixed asset to support the Dollar…
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Global Political Economy
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This will discourage the bank from circulating many dollars in the country. Therefore, the introduction of gold-based reserve system is a sure way to manage inflation and national budgets. Third, the gold-based reserve system encourages health completion in the business within a country. Introduction to this system in the United States will encourage an increase in industrial innovations. These because the industries will look for advanced technological methods in order to produce quality products. This will have a positive impact on the United States economy (Ravenhill 10)
However, there are shortcomings of this system in the United States. To start with, it may stunt the growth of U.S economic growth. A focus of production based on the amount of gold will overlook the resourceful contributions of the American people. Second, the system may inflate the rates on interest. This principle reason for this is to maintain the value of the dollar over that of the gold. Finally, many industries will face the danger of crumbling due to lack of funding from the government (Ravenhill 11).
Canada is not immune to hyperinflation. The country does not have enough gold mines. The exhaustion of the available reserve will mark the start of inflation. The country economy will stagnate since they will have no funds to support their industries. This will affect my purchasing power and will destabilize my financial position thereby disrupting my lifestyle.
The most plausible choice for my investment is in the shares. The principal reason for investing in these financial products is because of their high turn over (Ravenhill 69). Here in GTA, the data from Market Shares indicates their exemplary performance. The pros of shares include, they have a higher growth rate, there is high privacy in shares, and there are bonuses. The only con in this choice is the high risk of liquidation. Rational analysis directs my choice. The good trends in the share markets are the guiding principles of my preference.
Financial markets are irrational. Many times financial markets have adapted to respond to external forces in the market. They devise new methods to deal with short term interferences. This may not be in the long term plans of the financial markets. For instance, there may be a price-fixing of the shares. There are differences in whatever an investor gets in the bank as the information of a given company and that of the company. This indicates irrationality in the financial markets. Read More
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