Presentation Transcript

1. BrettonWoods System

   --Creation, Evolution and Collapse
2. The Gold Standard System Britain as the Hegemon Financial Crises under Britain: Baring Crisis in 1870s and the 1907 U.S. Financial Crisis Financial Crisis: Tendency in the Peripheral Countries Different Arrangements for Exchange Rates
3. The Keynes and White Plans Harry Dexter White: Pro-price stability John Maynard Keynes: Pro-growth Plan A Compromised, but more U.S. Version Embedded Liberalism: From Laissez Faire to Government Intervention Economic, Political and Strategic Purposes: Truman Doctrine, Containment Policy
4. Major Mechanisms under Bretton Woods System IMF World Bank ITO—GATT US Dollar Pegging at $35/ounce: Dollar-Gold Standard: “As good as gold” The Triffin Dilemma
5. Sea Changes in the International System The European Recovery Plan (The Marshall Plan) European (e.g., Germany) and Japanese Economic Rise The Dollar Overhang: 1962 The Vietnam War and the Great Society Project The Private Market vs. Government Market regarding the Value of Dollar in terms of Gold Nixon’s Unilateral Decision: August 15, 1971 Stagflation
6. Ad Hoc Plans after Nixon’s Policy The Smithsonian Agreement: 1971-1973 The End of Bretton Woods System: 1973 The Oil Crisis: Quadrupling of Oil Price in Less a Decade The Creation of Petrodollar The Cycles: Petrodollar, Eurodollar and the Third World Debt Two Cycles of Bust and Boom: 1980s and 1990s
7. Balance of Payments Balance of Payments: A statistical record of all the international monetary transactions undertaken by the residents of one nation with those of other nations in a given year, measured in current dollars. Surplus, Deficit and Equilibrium. Current Account: Money received for exports of goods and services. Capital and Financial Account: Money received from foreign buyers for sales of bonds, stocks, real estate, patents and other assets.
8. The MundellTrilemma The Fleming-Mundell Impossibility Theorem The Unholy Trinity: Free Capital Flow, Fixed Exchange Rate and the Autonomy in Macroeconomic Policy The Bretton Woods System: Fixed Exchange Rate, Policy Autonomy, but Control over Capital Flow
9. Sea Changes Again Technological Innovations: Communication and Transportation Financial Products The Importance of Private Capital The Importance of Portfolio Investment Financial Liberalization and Financial Globalization
10. Susan Strange: Innovations and Changes in Financial Industry Mad Money: When Markets Outgrow Governments Five Changes in 1980s Enormous and Fast Technological Innovations The Sheer Size of the Market End of Banking: commercial Banks turned into Investment Banks The Emergence of Asia—Japan and China—as a Major Player in the Casino Capitalism The Growing Involvement of Organized crime in Finance (Money Laundering for drug, corruption, tax evasion).
11. S. Strange: Three Main Categories of technology Computers Electronic Money, Light Speed of Change 2. Chips—Clearing House Interbank Payments System By 1995, one day transaction 1.3 trillion in this system; credit card, digital money. Significance for money supply and the velocity of money 3. Satellites Fax, the internet, email, teleconference.
12. Innovative Financial Changes: New Products, Derivatives Eurodollas Loans in 1960s Junk Bonds (high-yield bonds) in 1970s The average market value of newly issued bonds rated B or CCC in the 1970s: $322million; in 1986, $25.9 billion. Global Derivative Markets Future Contracts, Hedging against from losses in changing commodity (e.g., oil, minerals) prices and foreign exchange prices. Hedge funds. In 1995, the value of derivative contracts in 26 countries amounted twice the value of world economic output--$47.5 trillion. Credit Derivatives: Default swaps and default options Loopholes, Chinks in American regulatory system, tax law, etc.
13. Global Financial Cooperation G-4 G-7 G-10 G-20 G-2?