GCC TO CREATE COMMON CURRENCY

A LOOK AT THE GCC CREATING THE LONG AWAITED COMMON CURRENCY COMMON CURRENCY. WELL HERE WE ARE AGAIN LOOKING AT THE GCC AND THE POSSIBILITY OF THE CREATION OF A COMMON CURRENCY. SO FOR STARTERS LETS LOOK AT WHO THE GCC IS  ONCE AGAIN. GCC STANDS FOR GULF COMMUNITY COUNCIL AND IS MADE UP OF SAUDI ARABIA, QATAR, OMAN, BAHRAIN, UNITED ARAB EMIRATES AND KUWAIT.

THERE HAVE BEEN SO MANY WHITE PAPERS WRITTEN ON THIS TOPIC SPANNING DECADES AND NOW IT’S BACK AGAIN. THIS TIME THE TALK IS A BIT LOUDER AND BIT STRONGER.

THE EURO IS A COMMON CURRENCY AND IS USED WIDELY BY THE EUROPEAN UNION WHICH IS A COUPLING OF 28 COUNTRIES AND THE SUCCESS OF THAT PROJECT IS OFTEN CRITICIZED. SO WHY NOW DOES THE GCC WANT TO REVISIT THE COMMON CURRENCY TOPIC AGAIN?? HERE IS PAPER PUBLISHED IN THE BIS PUBLICATIONS THAT SHOWS THE PROS AND CONS OF A UNIFIED CURRENCY.

http://www.bis.org/ifc/publ/ifcb32b.pdf
Costs and benefits of a monetary union
Adoption of a single currency brings in benefits and inflicts costs on member countries. In general benefits emanate from the following:
1.The elimination of transactions costs and accounting costs. Most of these costs are associated with bid-ask spreads and commissions on foreign exchange
transactions. For small and open economies with unsophisticated financial markets, direct savings in transactions after adopting a single currency are probably larger. Lowering transactions costs might lead to higher output and consumption gains.

2. A removal of foreign exchange risk, which is considered a major obstacle to trade and cross border lending. It is argued that trade in goods and services especially among small firms will be enhanced, which would tend to intensify competition and increase allocative efficiency (Kenen, 1996). Rose (2000) contends that there is a
large positive effect of a common currency on trade and that effect is much larger than the effect of reducing exchange rate volatility to zero, through an irrevocably
fixed exchange rate arrangement (P.18).

3. Creation of more transparent pricing system, which makes international price
comparison easier.

4. Gaining more credible monetary policy by adopting the strongest exchange rate commitment (Frankel, 1999).

5. Monetary union arrangements are less susceptible to speculative attacks (Frankel,1999). On the other hand the costs of adopting a single currency, besides the costs of forming the union, are mainly relinquishing monetary autonomy. These costs are more likely to increase the more dissimilar shocks to member economies are. By the same token, costs tend to increase the lower the flexibility of factor markets, as this implies a difficulty of adjustment to shocks.

Previous Empirical Studies on GCC Monetary Union
A number of studies have tried to determine whether the GCC countries are ready to establish a monetary union based on economic similarities, common social and cultural backgrounds. Some studies reached the conclusion that the GCC members are not ready to establish a monetary union and that the progress towards a monetary union is very slow compared to what it should be. While others found some support to the GCC monetary union.

ALRIGHT THESE ARE GOOD ARGUMENT BUT THIS PAPER WAS WRITTEN IN 2007 SO NEARLY 10 YEARS LATER WHAT HAS CHANGED, BESIDES EVERYTHING?

WELL LET’S HAVE A LOOK, ONE ARGUMENT FOR THE CURRENCY IS THE CLOSE CULTURAL BOND BETWEEN THE NATIONS WHICH IS ABSENT FROM THE EURO ZONE.

Economics 101: Cultural bonds make strong case for single GCC currency
http://www.thenational.ae/business/economy/economics-101-cultural-bonds-make-strong-case-for-single-gcc-currency

What are the advantages and disadvantages of a single currency?

In 1999, the year in which the European single currency was launched, the Nobel Prize in Economics was awarded to Robert Mundell for his theory of the conditions under which it is desirable for multiple countries to use a unified currency rather than each having their own one. Today, due in part to the euro’s challenges, the GCC countries have decided to further review the best way to implement their own single currency.

So why would any country surrender its currency? The first reason is facilitating trade with currency partners: there are no transaction costs, and price comparisons become easier. Some types of market speculation can lead to volatility in exchange rates, which makes long-term investment riskier; currency unions eliminate that problem by eliminating exchange rates.

Second, the inflexibility of prices creates a dangerous temptation for the government: if it can surreptitiously print money faster than prices adjust, it can redistribute wealth in its favor in the short run, which it can use to pay off debt and fund programs. Ultimately, prices do catch up, and this creates cycles of high inflation and high interest rates. Some governments are forward-thinking enough to avoid the temptation to abuse the money supply, but for those that are not, joining the currency of a “credible” country is a quick way to impose restraint (like Odysseus tying himself to the mast).

Thus, countries which cannot resist the temptation to print money face a quandary: high inflation and interest rates outside the currency union or bouts of high unemployment inside it. Mr Mundell outlined an escape route: if workers can relocate across the political boundaries of single currency countries, then when unemployment rises the excess workers can simply move to the country with more jobs. That is why the EU implemented free labour mobility as a precursor to the euro’s launch.

The problem for the EU, however, is that there exist many non-legal impediments to labour mobility, such as language and cultural differences (imagine a Finn moving to Portugal). While GCC citizens tend to prefer living in their home country, potential mobility is much higher than in the euro zone, so the foundations of a single currency are arguably preferable

ALRIGHT SO THERE A FEW GOOD REASONS LET LOOK A LITTLE DEEPER BECAUSE IT SEEMS TO ME THIS COMMON CURRENCY HAS ALREADY BEEN DECIDED.
Gulf single currency inevitable: Oman central bank chief quoted
http://thepeninsulaqatar.com/article/31/10/2016/Gulf-single-currency-inevitable-Oman-central-bank-chief-quoted?

DUBAI: The creation of a single currency in the Gulf Arab region has become inevitable and is only a matter of time, the executive president of Oman’s central bank was quoted as saying.

Oman is not one of the countries pushing for a common currency, but “serious measures” are being studied to achieve it, the Saudi Arabian-owned Al Sharq al-Awsat newspaper quoted Hamood Sangour al-Zadjali as saying in a statement.

Omani officials were not immediately available on Monday to comment on the report, and it was not clear whether Zadjali’s remarks signaled any new momentum for the region’s single currency project.

The creation of monetary union became a primary objective of the six members of the Gulf Cooperation Council in the early 1980s. Four of them – Qatar, Saudi Arabia, Kuwait and Bahrain – formed a joint monetary council and a forerunner to a Gulf central bank in March 2010.

But the euro crisis and a lack of political will have slowed the project. Oman withdrew from the plan in 2006 and the United Arab Emirates pulled out in 2009.

Many bankers in the region say privately that introduction of a single currency remains unlikely for the foreseeable future, given technical difficulties and the fact that GCC states are struggling with low oil prices, which are having varying impacts on their economies.

Saudi Arabia has slowed sharply and has been forced into painful fiscal reforms, while Qatar and Kuwait, with relatively strong state finances, have come under less pressure.

JUST FOR OUR UNDERSTANDING YOU CAN READ MORE ABOUT THE GULF MONETARY UNION AND THEIR OBJECTIVES HERE    http://www.en.gmco.int/about/objectives

IN 2008 THE MONETARY UNION FOR A MEMORANDUM OF UNDERSTANDING WITH REGARD TO A COMMON CURRENCY WHICH YOU CAN READ ABOUT HERE
http://www.en.gmco.int/about/aggrement

NOW YOU HAVE ALL THE BASICS OF WHAT THE PLAN WAS AND WE SEE IT HAS BEEN TALKED ABOUT FOR A LONG TIME SO WHY IT THIS SUBJECT COMING UP AGAIN?
WE CAN SPECULATE AND LOOK AT THIS THROUGH A DIFFERENT LENS, OF THE 6 NATIONS 5 OF THEM HAS CURRENCIES PEGGED TO THE DOLLAR, KUWAIT IS THE ONLY COUNTRY PEGGED TO A BASKET OF CURRENCIES WHICH INCLUDE THE DOLLAR AND THE EURO AND THE REST OF THE BASKET HAS NOT BEEN DISCLOSED.
WE ARE SEEING THE DOLLAR PEG COUNTRIES COMING UNDER EXTREME PRESSURE BUT THE NATIONS ARE SAYING THEY WILL MAINTAIN THEIR PEGS DESPITE RUMORS THAT THEY WILL BE FORCED TO ABANDON THEIR PEGS.

WELL ONE NEEDS TO WONDER IF FORMING A COMMON CURRENCY WOULD ALSO OPEN THE DOOR FOR A COLLECTIVE ABANDONING OF THE DOLLAR PEG AND THE COMMON CURRENCY BEING PEGGED TO A BASKET AS WELL WITH OUT DISRUPTING POLITICAL TIES.

THE IMF HAS BEEN TALKING ABOUT USING THE SDR BASKET MORE AND WHEN I COME BACK I WILL SHOW YOU SOMETHING THAT THE IMF HAS JUST APPROVED FOR COLLECTING EXCHANGE RATES FOR THE CALCULATION OF THE VALUATION OF THE SDR BASKET.

ALL OF THIS GIVES US SOMETHING TO THINK ABOUT AND WATCH FOR SIGNS THAT THE COMMON CURRENCY WILL ACTUALLY COME TO PASS IN 2017.

I’LL BE BACK THIS AFTERNOON WITH THE IMF UNTIL THAN THANK YOU ALL FOR BEING HERE…
LOVE TO ALL ML

P.S. I REALLY NEED TO SEND OUT A SPECIAL THANK YOU TO TERRI AND MIKE AND JUDY AND THE REST OF MY LITTLE ROOM FOR HOLDING IT ALL TOGETHER IN MY ABSENCE. I RECENTLY ADDED AN 18 MONTH OLD TODDLER TO MY HOUSEHOLD AND HE HAS CERTAINLY KEPT ME DISTRACTED AND BUSY…LOL..

14 thoughts on “GCC TO CREATE COMMON CURRENCY

  • Trident704

    We knew you wouldn’t be gone too long; always a pleasure to be associated with such a strong group of folks! Looking forward to unpacking the current thread of GCC opportunities for learning!

  • Anonymous

    This seems to be opening up The New World Order

  • Farhad

    As you point out the cultural and language commonality is critical.The fact that all GCC countries export mainly the same commodity, oil and gas, and basically import everything else, makes for a very critical foundation for success in a common currency, not that it would be without challenges! This is in contrast to the expanded EU. In the absence of a monetary tool in individual countries in the Union to bsllance trade It takes a lot of olives and fetta cheese exporting to make up for importing an AIR Bus !

    • MY LADIES

      HAHA..FARHAD..VERY TRUE INDEED…BUT MY THINKING IS STILL IN FRONT OF THE CURVE, THINK THIS COULD BE THE PERFECT REASON FOR DROPPING THE DOLLAR PEG WITH OUT CREATING TO MANY POLITICAL TROUBLES.

      • Farhad

        I agree, a clever way to drop the pegs without angering key stakeholders and end up with a common currency that had s good chance to work!

  • Good day My Ladies I have a question that perhaps you give a definitive answer to …
    Say I am the newly formed Federal Reserve and have authorized my self to print currency , say I print
    $100,000.00 Federal Reserve Notes ( 1 dollar notes ) say I loan it all out at 10% interest with and expected return
    of $10,000.00 …Where does that $10,000.00 come from since the total currency supply is only a hundred thousand to start out with ? The fiat system ultimately defies logic . The indigenous populations of this country
    pre. European invasion had a vast treading network that involved trading of goods between nations and tribes. They had respect for the land and the resources it provided so they had no need for a green economic revolution. So we are to trust Goldman Sachs and others with so called private wealth to clean up the mess that they helped make over the past hundred and fifty years? Most of these entities holding such private wealth made their fortunes off basically slave labor did they not ? In a word greed fuels the banking industry. Christ was right when He said that the love of money is the root of ALL evil.
    Economic theory is just that theory.

    • MY LADIES

      HELLO JEFF I COMPLETELY UNDERSTAND WHAT YOU’RE SAYING AND JUST TO CLEAR UP A FEW THINGS FIAT MONEY HAS BEEN AROUND SINCE THE DAWN OF TIME. THE TRADING THAT YOU SPEAK OF BEFORE THE EUROPEAN INVASION WAS COMMODITY MONEY AND FIAT MONEY BY DEFINITION IS PAPER NOTES MADE TO BE LEGAL TENDER BY GOVERNMENT DECREE. MANY PEOPLE CONFUSE THE TERM FIAT MONEY AS BEING SOMETHING OTHER THAN THE GOLD STANDARD AND THAT IS NOT ACCURATE THEY HISS THE WORD FIAT WITH OUT EVER RALLY UNDERSTANDING WHAT THE WORD MEANS AND THEY THINK THERE WILL BE GOLD BACKED CURRENCY SOMEWHERE AND THAT JEFF DEFIES LOGIC TOO.

      NOW ONTO GREEN ECONOMIC REVOLUTION, ARE WE TRUST GOLDMAN SACHS??? WELL THEY DO MANAGE BILLIONS AND BILLIONS OF PRIVATE CAPITAL AND THAT VERY SAME PRIVATE CAPITAL IS WHAT IS GOING TO KEEP US IN THE FRYING PAN AND NOT IN THE FLAMES. I HOPE YOU DO NOT THINK FOR 1 MIN I BELIEVE THAT THIS PRIVATE CAPITAL BEING DEPLOYED FOR THE GREEN FINANCIAL SYSTEM IS TO MAKE A BETTER WORLD WHERE WE CAN ALL HUG IT OUT AND SING SONGS. OH NO NO NO…THIS PRIVATE CAPITAL IS BEING LOST EACH DAY IT IT NOT WORKING AND PRODUCING YIELD. THE CURRENT SYSTEM IS NOT ALLOWING FOR YIELD SO THE FOLKS AT GOLDMAN SACHS AND PLACES JUST LIKE THAT HAVE FIGURED OUT A BETTER WAY. UNDERSTAND JEFF THAT THE ARCHITECTS OF THE MONETARY SYSTEM UNDERSTAND THAT THIS SYSTEM IS BROKEN, AND UNDERSTAND ALSO JEFF THAT THESE ARCHITECTS HAVE NO EMOTION IN THIS GAME AND MORALITY HAS NO PLACE IN FINANCES. THE VERY PEOPLE THAT HELPED BREAK THE SYSTEM HAVE LONG SINCE HAD AN ALTERNATE PLAN AND THAT PLAN IS GREEN. AND WHEN AND IF GREEN STOPS WORKING THEY WILL HAVE ANOTHER PLAN. AND JEFF THEY ARE NEITHER ASKING OUR PERMISSION OR OUR FORGIVENESS.

      THE BEST WE CAN DO JEFF IS FIGURE OUT WHERE WE FIT IN AND DO THE BEST WE CAN WITH WHAT WE HAVE TO WORK WITH. OR NOT. THE CHOICE IS OURS. PERSONALLY I WANT TO UNDERSTAND THIS NEW SYSTEM AND LEARN TO WORK WITHIN IT.

      I HOPE I HAVE BEEN SOME WHAT HELPFUL TO YOU AND IF NOT PLEASE TEY TO ASK YOUR QUESTIONS AGAIN AND I’LL TRY AGAIN.

      THANK YOU….ML

      • Thanks My Ladies
        Yes money is A moral yet it can and is used for good or evil so yes the love of money is the root of all
        evil. I put Christ word above all others. Even now war (evil) drums are beating in many nations ! As they say
        fallow the money ! Fallow the build up of military forces around China and Russia etc…will we go to World War
        III before Green gets rolling for good ? You use the term “game ” when referring to the monetary system and its
        architects , if it is a game then it is a game of life or death possibly for the entire planet. Green is being met with
        a lot of resistance behind the scenes from those who cannot or will not relinquish power . We have sociopaths
        running this nation who could care less about the sanctity of human life let alone the good of the planet. They must be dealt with and taken out of positions of political and economic power before the Green Revolution can get much traction. Rome burns while Nero plays the fiddle! The citizens fallow the pied piper of the main stream news media propaganda machine and do not for the most part think for their-selves. Yes we must all
        educate ourselves regarding this “new monetary system ” which that the only thing new about is that it is digital. Nothing man made is ever truly fail safe so no wonder that the system is broken and in need of major repair ! This “new system ” will be no exception to that universal law of cause and effect ” Quote from Will Rogers ” If stupid got us into this then why can’t stupid get us out of it?” No the architects do not need our permission or our forgiveness but they do need our vote to implement their plan(s). I do not put my trust in the systems of men but rather in the One who created the heavens and the earth for His own good pleasure ! As far as I know He was the only one around at the dawn of time ! Go Green was His Idea before it was ever man’s ! The wake up call is for all humanity to do what we can do individually and corporately to bring healing to the earth for own sake and that of future generations. Wars and rumors of wars impede that process as they have through out the history of civilizations…. Hats off to you My Ladies for your insights and wisdom regarding how monetary systems work!!

      • MY LADIES

        THANK YOU JEFF, AND TRY TO DO WHAT I CAN TO KEEP IT AS REAL AS POSSIBLE..

  • R

    “AND UNDERSTAND ALSO JEFF THAT THESE ARCHITECTS HAVE NO EMOTION IN THIS GAME AND MORALITY HAS NO PLACE IN FINANCES. THE VERY PEOPLE THAT HELPED BREAK THE SYSTEM HAVE LONG SINCE HAD AN ALTERNATE PLAN ”
    The modern version of the ancient “SILK ROAD”, gotta wonder just how ‘olde’ these actors really are..(:-O

  • R

    oooo
    VERY LONG AND TORRID HISTORY FOR SURE, that silk road is.
    Queen Bess in 1600 took full advantage to fill England’s coffers on the tea and opium trade stealing it away from the Portuguese with the introduction in the guise of the East India Tea company.
    Yes indeed, reads like a Clancy novel for sure. Very intriguing one might say and also the adage, “Follow the money trail, its all a business model”.
    Lots to learn from this history. Me thinkest it set a template (blueprint) for what is unfolding this day m’Lady & m’Lord.

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