In 1997, an earthquake hit Asian stock exchanges, the shock wave reached Russia a year later, and then Latin America, including Brazil in 1999. To the world, these crises have been a succession of real and financial shocks of exceptional magnitude. Far from having exogenous origins, this global crisis stems from endogenous factors that are strictly related to the functioning of the current financial system. Therefore, one should revisit the history of the international financial system and its evolution since its emergence during the 70's, to the detriment of international trade and monetary relations. Indeed, while the international monetary system is an old reality, the international financial system is, instead, derived from the changing global economy. Between 1945 and 1975, importance was allocated to monetary relations. The concerns of nations were primarily commercial and monetary policies. As a result, priority was given to free trade and currency stability, in order to prepare to cope in the post-war period. Indeed, economic autarky and the inflation caused by World War II have completely disrupted the remnants of the regime of the gold standard. Thus, the Bretton Woods conference was convened in 1944 and the two major international bodies, namely the International Monetary Fund and the World Bank emerged. The free movement of capital thus represented a secondary objective.
In 1975, one began to see a redefinition of relations between national financial systems, a redefinition which eventually led to the globalization of finance and the creation of a vast international capital market. And so the international financial system had emerged. Indeed, the questioning of the Bretton Woods system, the first episode was the removal of the dollar's convertibility into gold in 1971, was the first crack of the world economic order after the war. The 70's were the setting for major imbalances in international trade and significant funding problems, which were subsequently led to the formation of spectacular surpluses and deficits . The establishment of financing channels to restorethe global balance has been the catalyst for the development of the financial system. The current financial system is the result of the convergence of a logic of profit-seeking by banks and logic of regulation by the Euro-markets, the IMF intervened to counter these private logics.
The end of exchange controls, the opportunity for multinationals to lend their excess cash, the end of the credit control and monitoring of the money by the interest rates have generated a substantial increase in capital flows and accelerated, an irrational, globalization.This idea that advocates to market them as being the instrument of better allocation of resources for balanced development and has established itself for over two decades and has been shaken by the eruption of the financial crisis of 1998, the first crisis of globalization. The emergence of crises, a new type, more commonly known as "crises of the century 'crises or "second generation" has significantly altered the effectiveness of crisis management by international financial institutions, especially the IMF. It is that lack of control by the two institutions, accompanied by the inability of the Fund to provide on time and to deal effectively with the recent financial crises, shows the urgency of the implementation of reform by the international monetary and financial system, particularly the IMF.
Tags: The instability of the international financial system; new proposals for reform; emergence of crisis; effectiveness of crisis management
[...] Absence makes proper regulation hedge funds is symptomatic of the problems arising from financial globalization, exacerbated by offshore centers. Globalization, democratizing access to formerly restricted to trade between 20 countries and 30 major international financial system, has also weakened the scope of regulation. The hedge funds , albeit weakly regulated, were already mostly installed in offshore centers, which alters significantly strengthening the regulation of these entities may relocate entirely to offshore centers. Subsection 11 - Evolution of international finance : There is no doubt that financial theory is one of the most developed areas of the overall economics. [...]
[...] For the Bank of International Settlements it is the residual debt (sometimes called " remaining debt a concept that covers the entire external debt reaching initial maturity. The World Bank (in its publication Global Development Finance - GDF), the short-term debt includes only external liabilities original maturity of one year, but it includes the official commercial loans to developing countries and communicated by the OECD. Source : Finance & Development, December 2000. During the 90s, short-term loans from international banks to developing countries showed a strong growth until the Asian financial crisis broke out in 1997, as shown in the table below : The expansion of short-term debt in the 90s Another significant financial developments of the 90s was the substantial increase in the share of loans in the private sector, including banks, in total borrowing. [...]
[...] Let T : the forward, C : the spot and CP : the carrying cost of the asset representing the cost of financing the assets and cash after transaction costs And T = C + CP Since T is a function of these two courses are supposed to grow together. However, T and C are more fit at the same speed in reality, where the risk of sudden changes in the price of the underlying relationships once established arbitration. On the derivatives markets, the speculation is much easier especially because of leverage inherent in these markets. Indeed, it is enough to stop a ridiculous amount of liquidity called deposit, or pay a small amount relatively insignificant compared to the gains hopes to take a position. [...]
[...] Assumptions : In this case, we are dealing with three dates t = and a single consumption good at each date. The final two dates 1 and 2 are essentially the same as the previous model. To highlight the uncertainty in the credit expansion, it should be assumed that the amount of credit available to be lent to investors, is partially controlled by the central bank. The latter imposes reserve requirements and the amount of assets available to be used as reserves. [...]
[...] Financial capital is therefore considerably. Thus, the off-balance sheet operations, corresponding to taking speculative position, they have exploded in the balance sheets of banks. In addition, there has been a phenomenon of " securitization "of bank assets, which means an increase in the share of marketable securities in the banking jobs. Finally, we noted a significant change in the structure of the bank results, characterized by a significant reduction in current income intermediation in favor of revenue related to market operations and foreign exchange (Plihon, 1999). [...]
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