Wealth may be transferred from country to country in the form of goods and services, but
by far the greatest transfers are made in the form of money. Just as a stable monetary
unit facilitates economic activity within a country, so international economic activity is
facilitated when there are stable relationships between one country’s currency and
another’s. It is not simply a question of the ease or difficulty of translating dollars in yen,
francs or yuans. It is a far more important question of knowing whether an investment
made in the United States, Japan, China or France today will be repaid a decade or more from now in money of the same value – whether measured in purchasing power or in the
currency originally invested.
Various attempts at stabilizing international currencies against one another have followed
the disappearance of the gold standard. Some nations have made their currencies
equivalent to a fixed number of dollars, for example. Various European nations have
created their own international currency, the Euro and the yen has been another stable
currency widely accepted in international financial transactions.
With the spread of electronic transfers of money, reactions to any national currency’s
change in reliability can be virtually instantaneous. Any government that is tempted
toward inflation knows that money can flee from their economy literally in a moment.
The discipline this imposes is different from that one imposed by a gold standard, but
whether it is equally effective will only be known when future economic pressures put
the international monetary system to a real test.
Whatever the merits or demerits of various political proposal, what must be kept in mind when evaluating them is that the good fortunes and misfortunes of different sectors of the economy may be closely related as cause and effect - and that preventing bad effects may prevent good effects. It was not accidental that Smith Corona was losing millions of dollars on its typewriters while Dell was making millions on its computers. It was not accidental that Safeway surged to the top of the grocery business while A&P fell from its peak to virtual oblivion. The efficient allocation of scarce resources, which have alternative uses, means that some must lose their ability to use those resources in order that others can gain the ability to use them Typewriters were no longer what the public wanted after they had the option to achieve the same end result and more with computers. Scarcity implies that resources must be taken from some places, in order to go to other places.
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