Global Reserve Problem

According to Stigliz the global financial system is not working well. It is especially not working well for the developing countries; money is flowing uphill from the poor to the rich. The richest country in the world, the United States cannot live within its means. They have been known to burrow 2 billion a day from poorer countries. Much of the money that is burrowed from the developing countries to the developed world is used to pay enormous debts. Stigliz believes that the problems of the global financial system have much to do with the problems of the global reserve system. In this paper I will be going over the problems he writes about and his some of the solutions he proposes. Excessive debt does much harm to the developing …show more content…
Often these reserves were used to back up a country’s currency. Reserves helped these countries with any risks that they may have faced. Confidence was boosted in both the country and the currency due to these reserves. They are used in times of need and they form a buffer against unexpected changes in the cost of debt caused by changing interest rates. Many hardships can occur and the reserves could be used to import food in case of crop failure is one such an example. The amount of reserves depends on the country but they should have enough in the reserves in order to get a few months’ worth of imports. Developing countries have been known to have three months’ worth of imports in the past but recently they have held up to eight months’ worth of …show more content…
“Every year. Each member of the club—the countries that signed up to the new global reserve system—would contributed a specified amount to a global reserve fund and at the same time, the global reserve fund would issue global greenbacks of equivalent value to the country which they would hold in their reserves.”(Page 262) There would be no change in the net worth of any country but instead acquired an assets and or claim on others. The country has obtained an assets that can be used in times of emergency. The country can take the global greenbacks and exchange them for euros, dollars or yen and use that money to aid in the crisis whatever it is. Globalization is good but is a lot of issues that need to be fixed. In his book Stiglitz mentions many of these problems and offers solutions to them. Globalization needs to be to fix so everyone can have what they need. As it stands the rich are getting richer and the poor are getting poorer. Many people feel that they are making a pact with the devil with the way Globalization has been managed. It need to change and changing it will take a long time but it can be