1 / 18

The International Monetary System

The International Monetary System. 4 Most Important IMS Things. What is the IMS High level of interdependence A Western Phenomenon Historical Advantages of GN. #1 What is the IMS. The means for exchanging currency or money between countries  Measures of monetary wealth of countries

shino
Download Presentation

The International Monetary System

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. The International Monetary System

  2. 4 Most Important IMS Things • What is the IMS • High level of interdependence • A Western Phenomenon • Historical Advantages of GN

  3. #1 What is the IMS • The means for exchanging currency or money between countries •  Measures of monetary wealth of countries • Gross Domestic Product (GDP) • Gross National Product (GNP)

  4. #1 What is the IMS Purchasing Power Parity (PPP) • Compares buying power from market to market • Big Mac Index • Essentially used to track inflation • i.e. what can be purchased with a unit of currency • Compares currencies

  5. #2 The IMS is highly interdependent •  In 2011, $410.6 T flowed through the system http://www.joneslanglasallesites.com/gcf/wp-content/uploads/2011/08/GlobalCapitalFlowQ4.pdf • That’s about $1.1 T/ per day • 60% of global capital through 4 cities

  6. #2 The IMS is highly interdependent Primary Banking Centers http://www.joneslanglasallesites.com/gcf/wp-content/uploads/2011/08/GlobalCapitalFlowQ4.pdf

  7. #2 The IMS is highly interdependent Economic crisis in one country contagion • Where it all began • Great Depression 1929 • Next stop • Mexico, 1980 • Why couldn’t Mexico declare bankruptcy? • Followed later by… • Mexico 'Tequila Crisis' 1994 • 'Asian Flu' Crisis 1997 • Russian 'Ruble Crisis' 1998 • Argentina 2001 • Global Recession, led by US/ Europe 2008

  8. #3 A Western Phenomenon: Europe History: • European colonization • Portuguese exploration • British domination • Gold Standard • Post-WWII-US hegemony • Why? • How? • What happened?

  9. #3 A Western Phenomenon: US Hegemony Why did the US assume hegemony after WWII? • Democracy • Trade partners • Allies

  10. #3 A Western Phenomenon: US Hegemony How did the US promote economic hegemony? • US assumed UK’s previous role • Became central banker to free world • Established gold standard • Fixed Rate of Exchange • Each currency is fixed to the value of a particular currency's worth in gold • From 1840 until a little after WWI-based on British pound sterling • Start of Bretton Woods system (1944), gold standard set at US$35=1 oz. gold

  11. #3 A Western Phenomenon: US Hegemony How did the US promote economic hegemony? • US as central banker to free world • Gold standard • Foreign Aid: IGOs, Bilateral • Marshall Plan, Truman Plan, IBRD • Rebuild WE and Japan; secure Turkey & Greece • Military Aid • Investment through MNCs

  12. #3 A Western Phenomenon: US Hegemony Central banker= economic burden • Unilateral support and control of system • Short-term adjustments for long-term rewards • By 1971, US is buckling under pressure

  13. #3 A Western Phenomenon: US Hegemony What led to a strained US economy in 1971 ? • Vietnam draining economy • American civil rights movement • Post-war economies rebuilt • Japan and Germany very strong • Lots of US dollars held outside of US; not in circulation • Large investment outflows by MNCs • Declining exports (more external competition) • Rising oil prices, cartel

  14. #3 A Western Phenomenon: US Hegemony Nixon responds to pressure • Delinks the dollar • System moves from fixed to floating rate of exchange • Floating rate harder on GS • Some opt to peg to a major currency • Belize, Venezuela, Saudi Arabia-USD • Several former African colonies-euro • Morocco, Ivory Coast, Cameroon • Some opt to adopt a foreign currency • Ecuador, Panama-USD • European microstates- euro • Zimbabwe—relies on rands, dollars, pounds

  15. #4 Historical Advantages of GN Historical Advantages: • Industrial Revolution • Colonization & Imperialism • Creation of Institutions • Post-WWII • IBRD • ECSC • G-5

  16. #4 Historical Advantages of GN Post-WWII Institutions • International Monetary Fund • Created at the Bretton Woods with the Bretton Woods Agreement in 1944 • Purpose: Monetary stability • International Bank for Reconstruction and Development (IBRD) • Also Bretton Woods creation • Present-day World Bank Group (WB) • Purpose: Reconstruction (post-WWII); Development

  17. #4 Historical Advantages of GN • European Coal & Steel Community (ECSC) • Regional IGO of 6 countries formed 1951 • Purpose: reduce tariffs for trade • Present-day European Union (EU) • Now has 27 members • Significance to IMS: led to coordinated monetary policy with eurozone • Group of Five (G-5) • Formed in 1985 • Purpose: coordinate monetary policy • Group of 20 (G-20), replaced G-5 in 2009 • Purpose: include EEs for monetary policy coordination

  18. 4 Most Important IMS Things • What constitutes the IMS • High level of interdependence • A Western Phenomenon • Historical Advantages of GN

More Related