Cleo Bonny reading ambassador killer presentation skills international financial system

Presentation by Cleophus Bonny Zamadunga on the in-depth of international

financial system

The international financial system is the global

framework of legal agreements, institutions, and both formal and informal economic actors.

International financial system

It was after the Second World,1944 Bretton Woods system

agreements took place pertaining to the international gold standard in the 1930. It was time of economic unsustainability and great depression.

to govern monetary relations among independent states.

The Bretton Woods system of monetary management recognized the rules for commercial and financial relations among the world's major industrial states and independent states.

From 1944 to 1971 gold exchange standard used to maintain the dollar price of gold at 35$ per ounce.

The creation of international financial system

Historically between 1870s to the eruption of World

War I in 1914 there was so called “first age of globalisation”. Rich nations, colonialists and the ruling elites except poor nation were advancing from a well-integrated financial order. Imperialists, and industrial power, ruled more of the world, however this international financial allowed members to convert or accept each other's currency as legal tender. And transactions were facilitated by widespread participation in the gold standard.

Fin B Jansen (1966)

This is the General or multilateral Agreement on Tariffs

and Trade that regulates international trade reduced tariffs, trade barriers and getting rid of preferences. This was prior to International Trade Organization's failure (ITO never saw the light) which was replaced by the World Trade Organization in 1995.

World Trade Organization supervises and formalizes agreements signed by representatives of member governments. It provides dispute resolution and liberalizes international trade which started on 1 January 1995 under the Marrakech Agreement replacing the General Agreement on Tariffs (GATT).

General agreement trade and tariffs (GATT)

The regional currency Euros for European countries

can create hostile environment through single interest rates for smaller or larger.

The single interest rate can be lowered or increased and hurt larger or small countries.

The regional currency in international

financial system

According Fin B Jensen (1966) two world wars

between 1914 to 1945 brought bad and severe disintegration and unhappiness in financial systems such as inflation.

After the wars North America was to transfer capital to the rest of the world.

Origins of International monetary

fund

The World Bank is an inter-governmental institution,

whose capital stock is owned by its member governments

John Maynard Keynes said that the World Bank group speared-head by America and Europe will be only one with a duty to expand the world’s economy. The economy these powerful nations have only expanded instead.

WORLD BANK (WB, 1944)

It provides financial assistance to development of the

territories of its members. It facilitates the investment of capital for production. It promotes private foreign investment by means of guarantee of participation in loans and other investments.

According to Oliver's accounts of Bretton Woods the conditions of world Bank and its policies has become the projects for developing countries.

The World Bank imposes policies and make nations weak while loosing certain national interests.

The Bank's advice is based on a wealth of technical knowledge, information and research.

Functions of the World Bank

As Gilbert et al (1996) states the World Bank's to be:

1.Bank, money lending and advice or educator.

2. Development Agency, supervising projects, objectives of government's policies and development practice.

3. Development research institution, from the research activities and policy conditions to development agency for poor nations.

Three Main functions of World Bank

There is no autonomy because of political pressure

mostly from United States. Financial top up and the negotiation requires agreement from potential members. Its about rapid growth of world productions for industrialized nations.

The Bank's bureaucrats research, prepare policies (projects) for poor countries. These policies are approved by political masters such as United States and United Kingdom. The loans and the bank's policies for poor countries are politically influenced by powerful members.

World Bank independent?

The bank borrows on capital markets and lends to

poor countries.

In the process the bank generates its own income.

The paid-in capital subscription by national governments have diminished.

This is a system begs to reserve a fixed exchange rate with a foreign currency such as a dollar with an obligation of a central bank to be subordinated to the exchange rate target of the dollar.

How does the bank raise its money?

The Role of Central Banks in international financial

system and its Stability has been a gradual integration of international financial system in the central banks of the countries. And they meet to discuss the key role in international financial system.

Central banks in international financial system

Perhaps Marxism’s criticism of capitalism was right.

African and Asian nations are forced to accept projects and policies if the loans are granted.

Liberalism international financial system is there to persuade smaller and poor countries to give up their rich resources to the global market through the multinational corporations, powerful states, international financial institutions.

It confirms Mercantilism theory that the IFS conducts research, protect, preserve wealth and power and sustain to the clubs of powerful nations.

Marxism and Liberalism Mercantilism

The money system has regulators and institutions to

supervise those on the regional and national level.

E.g. World Bank, international monetary system, National agencies, departments, ministers, central banks, and private institutions.

Harry Dexter White and John Maynard Keynes

Structure of international financial system

The effects in those countries are either good or

negative especially when the United States and its federal system change its financial policies.

The dangers of pegging a currency to the dollar

Defective financial system can hamper trade flows,

destabilize prosperity and create financial disaster.

It is International financial system creates credit, prosperity and growth environment.

It (Gill and Law, 1993) gives greater power to those who can move the capital around the global.

Foreign investors with potential capital can threaten the government if the government creates policies favouring the welfare.

Financial markets operates and transactions are real quick in the world as a result the governments looses power.

The disadvantages of International

financial system

Before the international financial system, operations were

characterized by disintegration and competitive

devaluations. Therefore free trading system and fair

international financial rules.

system was formed to conform stable democracies with a policy instrument to guide and steer the economy towards fair trade and distribution .

The importance of international

system

The responsibility of capital flows, markets, trade,

exchange rates, foreign policies, credit has moved from government to corporations, international organizations and powerful nations with influential policies. Balance of payments: A favourable balance of payments exists when more payments are coming in than going out.

This characteristic of international financial system lies in lending and its power to research in potential projects and policies. The system still favours its own political master.

The dangers

Bretton Woods’s system was the first model of a

fully negotiated monetary order intended to govern monetary relations among independent states.

The Bretton Woods system of monetary management recognized the rules for commercial and financial relations among the world's major industrial states in the mid-20th century.

Bretton Woods agreements

International Monetary Fund, was established at the same time as the World Bank to tackle the problem of international investment.

REGIONAL FINANCIAL AGREEMENT SYSTEM

1. European Central Bank

2. African Bank

Monetary agreement system

agreement system in among countries like Swaziland, Lesotho, Namibia, whose currencies are pegged to South African Rand.

INTERNATIONAL MONETARY FUND AND REGIONAL SYSTEMS

It provides temporary assistance in correcting the

balance of payments difficulties and a long term investment to other institutions.

However, countries in Asian, African, and Latin America that obtained IMF loans made their conditions the worse medicine than the serious terminal disease.

International Monetary Fund

Industrialised countries and exclusive clubs that

regularly meet, discuss the world economy, financial systems and global challenges in the absence of countries like Mozambique in the world of close to 200 countries.

G8 OR G20

1. International Bank for Reconstruction and Development (IBRD).

Funds projects to developing countries. 2. International Finance Corporation (IFC). Funds private development

projects (1956). 3. Multilateral Investment Guarantee Agency (MIGA, 1985) political risk

insurance guarantees to investors and protect foreign direct investments against political and non-commercial risks in developing countries.

4. International Development Association (IDA, 1956) Developing nations could no longer afford borrowing, IBRD was not good enough. Poor nations called for the establishment IDA grant loans to them.

5. International Centre for Settlement of Investment Disputes (ICSID, 1966) International negotiation institution facilitates settlement and resolution of legal disputes between international investors.

Five different parts of World bank

International economic sanctions are quite common

in the international financial systems in such countries as Zimbabwe. However the United States and Europe have been the major country imposing economic sanctions in the world. The target country may loose its own national interest through its foreign policies formulation and implementation as well as welfare.

SANCTIONS IN INTERNATIONAL FINANCIAL SYSTEM

The international financial system power and the problems of

poor countries may have been influenced and created by mercantilists.

Thomas Munn one of economists. The idea of using policies of protection, subsidy, taxing, accumulation, trade competitive surplus goods.

Sell goods and you do not buy goods. Receive gifts but do not give gifts. Poor nations consuming and enjoying what the rich nations produce while they bring themselves up.

Sell more at higher price to strangers and consume less of their value. Sell them cheap if items loose quality than loose them completely.

Increase the wealth and treasure from poor and weak nations and export more and import less.

Thomas Munn's theory (1571-1641) with a problem of

international financial system in poor countries

According to Dominick Salvatore absolute advantage is

the ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group.

This group is G8 and G20, World Bank, IMF, regional organizations, international organizations, multinational corporations, security council in UN.

So even when Adam Smith attacks Thomas Munn with his comparative advantage theory which is an ability of an individual or group to carry out a particular economic activity more efficiently than another activity of any nation is still practiced in powerful group.

Theories of David Ricardo in

international financial system

There is still movement of Money internationally

even if international regulations of international financial systems are in place.

Illegitimate drugs money, money movement.

Illegitimacy of International financial system

The rise of digital and virtual currencies such as Bitcoin.

This is peer to peer form of payments which can no longer be ignored.

Bitcoin as a safe and well preserved from inflation, and sanctions and a way to evade capital controls from formal regulations. However this digital transaction has instability for it to be international currency.

But it meets the requirements to be accepted as national currency since it can evade sanctions, inflation.

Contemporary financial

international system

Policy proposals and funds conditionality must promote equity

markets and make emerging market countries less vulnerable.

Reduce fund surveillance and strategic interest of creditor countries.

Funds that spells out the debtor countries national agenda.

Vulnerable countries to establish different institutions and different markets before accepting the loans and defining their approaches.

IFS to warn poor nations the dangers of liberalizing foreign aid which has self-interest elements, international capital flows and domestic financial markets.

Tax payers of creditor countries to be educated.

Recommendations (Reformation of IFS)

From 1944 to 1971 gold exchange standard used to

maintain the dollar price of gold at 35$ per ounce.

From 1870 to the eruption of World War I in 1914 there was so called “first age of globalisation in which colonialists, mercantilists and the ruling elites moved their wealthy across the global.

After the war North America was to transfer capital to the rest of the world.

Reduce fund surveillance and strategic interest of creditor countries.

Conclusion

Bibliography 1. Harold James, 1996, international Monetary Corporation since Bretton Woods,

New York, Oxford University Oress 2. Orman Suze, 2003, The laws of money, the lessons of life, New York, Free

Press 3. Boorman Jack and Icard Andre, 2011, Reform of the international monetary

system, New Delhi, SAGE Publications Inc 4. Cohen j. Benjamin, 2008, Global monetary governance, New York, Routledge 5. Franser Robert and Long Christopher, 1992, second edition, United Kingdom,

Longman Group 6. Norton Joseph. J and Auerback Raymond M, 1993, International finance in the

1990s, United States of America, Blackwell Publishers 7. Harter Marjorie B. Ph.d, 2004, Contemporary Living, Washington, DC,

Goodheart-Willcox Company, Inc 8. Isard Peter,2005, Globalisation and the international financial system, Cape

Town, Cambridge University Press

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