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Zoning for the Love of Money
Corney Vanhelden
By Corney Vanhelden
What Im talking about here are currency zones: geographic areas that use a specific currency for most financial transactions.
Did you know that in the world today there are four major currency zones? Those zones and their respective currencies are as follows:
- Russia ruble
- China renminbi (yuan is the unit of transaction)
- Europe euro
- USA dollar
Russias Ruble The ruble certainly has the largest territory in geographic terms, stretching an amazing expanse of nine time zones. Since the end of Communism, the monetary system in Russia has been very fragile. So fragile that even in the 1990s, anyone who had a nominal amount of money to invest could open a bank. The instability of this system led to a situation where in one year 1993 1994 50 bank managers were killed as a free-for-all, winner-take-all attitude prevailed. To shore up the precariousness of the Russian economy the U.S. poured in millions of $100 bills, which became the desired currency, while the ruble staggered along at half-mast. Finally, in 1998, the Russian economy collapsed and the only lucky people were those who had their cupboards full of $100. Although things are not as dire as in 1998, the Russian banking system is quite primitive: many years behind the times.
Chinas Renminbi A late currency bloomer, China officially declared its official currency in 1949, and heres how it works. The official tender is the renminbi while the basic unit of currency is the yuan. Unlike the Russians who languished in chaos, the Chinese economy remained stable over the years, even when the country was isolated because of an embargo against it by many countries. Today the question is whether the yuan is undervalued. Those who believe it is feel it gives China an unfair advantage with its international exports which has resulted in a trade deficit with the U.S. Others believe it is valued fairly, and that to revalue it at this time would sent the countrys economy into a tailspin which could in turn make the current world economic situation even more dire.
Europes Euro The euro is the newest currency of the four. It emerged on January 1, 1999 with a goal to create an apples and apples economy throughout all of Europe. In theory this is great, but in practice, it didnt quite work out that way, at least at first. The thing was, prices varied greatly, so we were always faced with the dilemma of paying the local price or traveling 60 miles to save a few euros. In addition, some folks simply refused to adopt the new currency and kept with their countrys currencies. However, the new generation does not remember the old currencies and has grown up with euros. Today it is widespread, accepted, and strong.
And so I conclude my basic explanation of currency zones, a concept that is exploding in relevance in the worldwide economic picture.
To be continued.
Corney Vanhelden is a successful entrepreneur and international businessman with many years of experience. This article is a short note on one of the chapters of his new book `How to Survive without Taxes`, see his site for www.Done-with-IRS.com specifics.
Article submitted Wednesday, November 12, 2008
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