Download 14 Currency markets

Economic words
mutual fund - a professionally-managed firm of collective investments that pools money
from many investors and invests it in stocks, bonds, short-term money market instruments,
and/or other securities. In a mutual fund, the fund manager, who is also known as the portfolio
manager, trades the fund's underlying securities, realizing capital gains or losses, and collects
the dividend or interest income. The investment proceeds are then passed along to the
individual investors. The value of a share of the mutual fund, known as the net asset value per
share (NAV), is calculated daily based on the total value of the fund divided by the number of
shares currently issued and outstanding. (CZ: společný fond)
outflow - the act of flowing out (for example the outflow of capital, CZ: únik kapitálu)
to diversify - to invest in different types of (securities, industries, etc.)
purchasing power parity (PPP) - a theory which states that exchange rates between
currencies are in equilibrium when their purchasing power is the same in each of the two
countries.
General vocabulary
greenback – American banknote
bout – a period (of illness, depressions…)
turmoil – a state of great confusion
disquiet - uneasiness
woeful – of poor quality or condition
hoard - store
disentangle - free from involvement or entanglement
frailty - weakness
blithe – carefree, light-hearted
to languish – to become weak
to rally – to recover
sustainable – capable of keeping in existence/of being continued
Read the text and answer the questions.
1. Why will American tourists spend more money in France and Great Britain?
2. What are the causes of dollar weakness?
3. Is everybody unhappy about a weaker dollar? Why /Why not?
4. Is it only America that has external debts?
5. How would you describe the graph in the text?
Discussion – Tobin tax
Many people today argue that currency speculators rather than governments or central banks
are able to determine exchange rates, interest rates, and levels of investment, trade and
growth. Around the world, over $1.8 trillion dollars are traded every day by currency
speculators. Opponents of currency speculation are calling for governments around the world
to introduce a tax on international currency transactions. A Tobin tax – named after the
economist James Tobin who first suggested the idea – would be an excise tax on cross-border
currency transactions. A tax of 0.1 to 0.25% of volume would discourage short-term
speculative currency trades, without affecting long-term productive investments. Such a tax,
its defenders claim, would make financial markets less volatile, and could generate hundreds
of billions of dollars a year for international development, such as basic environmental and
human need in poor countries.
Do you agree with the idea of such a tax, or with constraints on speculative currency trades, or
do you think that people should have the right to do what they like with their assets?
Source: I. MacKenzie, English for Business Studies)
Opinions are divided between anti-globalizationists who applaud that the Tobin tax could
protect countries from spillovers of financial crises, and pro-globalizationists who stress that
the tax would also constrain globalization and dry up world liquidity.
Unexpected, though qualified, support for the Tobin tax has come from the multi-billionaire
speculator George Soros, who stated that, while the tax goes against his personal interests, he
thinks that its introduction could have positive effects on the world economy. However, he
advocates a variation to the Tobin tax: Special Drawing Rights or SDRs that the rich countries
would pledge for the purpose of providing international assistance.
The "City Notebook" column in the British broadsheet The Guardian, August 30, 2001, put
the case against such a tax in straightforward terms. It said that currency speculators are "an
exceptionally useful lot, working day-in, day-out, risking their own wealth to supply a thing
called liquidity. Without liquidity, markets dry up, prices become volatile and goods become
difficult to shift." If a Tobin tax were in place, the editorial continued, that useful work would
not be as well accomplished. "The net result is that everyone involved — producer, trader,
buyer — becomes poorer, not richer", wrote The Guardian.
(Source: Wikipedia)