国际金融期末论文.doc

International FinanceInternational Monetary Systemthe history, the presentation and the futureAs the current global financial crisis exposes the inherently unstable and risky situation in the existing international monetary system, debates on creating some new systems are getting heated.The international monetary system is the combination of international monetary system, international monetary financial institutions and international monetary orders passed down by history and customs. It is the legal and institutional framework within which the foreign-exchange market operates. Over the past 120 years, the international monetary system has gone through major changes as it has evolved to its present structure.Usually we see the gold standard as the earliest international monetary system. It had a fixed exchange rate system as each country pegged the value of its currency to gold to establish its par value. The gold standard era began from the 19th century to the end of the First World War. Major trading countries followed this system and the British Pound was the most important currency at that time.It can divide into three parts. The first part can see as a complete gold standard. At that time, people could exchange paper currency into gold coin freely. Then it went into the second part, in which there almost no gold circulated. Unless you had enough paper money or exchange was forbidden. In the last part, the nation put its own gold in foreign banks and no gold was allowed circulating. If you needed some, you should exchange you money into foreign currency. Then put them into gold. In the period of time, the on gold nations were seen as colonies of some big nations which reserved gold.The pressure caused by the First World War on economy influenced by the Great Depression. The Bank of England was no longer able to redeem its paper currency for gold at par value and allowed its value to be determined by supply and demand. With Britain abandoning the gold standard, there appeared different areas in the world. Some countries pegged their currencies to the sterling, some countries to the US dollar and some to the French Franc, forming the “sterling area”, “dollar area” and “franc area”. Then we saw the end of the fixed exchange rate system. That meant a collapse of gold exchange standard. This period witnessed the degeneration of the international monetary system. All countries could do nothing more than devaluing money so that their export goods could be more competitive. Indeed, there were some benefits. However, this man-made devaluation caused serious inflation. International trade contracted and economic conflict finally led to the Second World War. When the war replaced the Depression, cooperation seemed impossible. As the situation had become more and more serious, 44 countries came together at Bretton Woods to set a new gold standard, which is known as the Bretton Woods system, at the end of the Second World War. One important fruit of the meeting is the establishment of the International Bank for Reconstruction and Development and the International Monetary Fund.The Bretton Woods Conference put US dollar onto the significant place. By the dominating economic and political influence of the United Stated, the dollar replaced the sterling and turn to be the major currency for international settlement. In this system, only the US dollar pegged to gold while others had no rights to do so.However, this system has its biggest problem. If we use US dollar as the global money, the US has to run in a long debit in international business so that the US dollar can spread all over the world. But at that time people will lose heart about the US dollar what may lead to US dollar crisis. But if USA wants keep balance in BOP, then money supply can be cut off. In conclusion, this is a tough problem which can never be settled. In the late 1950s, as the America economy had become less competitive and the balance of payments had gone bad, there are excessive dollars circulates over the world. Everywhere in the world began to exchange dollar into gold. As a result, the US government had to abandon the exchange rate of the US dollar and gold. Then floating exchange rate system gradually took over. US dollar could never be the center of all kinds of currencies. The frequency and increasing intensity of financial crisis following the collapse of the Bretton Woods system suggest that the costs of such a system to the world may have exceeded its benefits. The price is growing even higher, not only for the users, but also for the issuers of the reserve currencies.That was the Jamaica System. In the system, gold could never be use of currency. And floating exchange rate has become legal. Moreover, categories of currency become various. The flexible exchange rate system has never been clean float or free float. The central banks take various measures to intervene in the price of its currency. So the current practice is often called a managed float or dirty float. The common measures taken for intervention are: 1When the price of a foreign exchange goes too high, the central bank may increase its supply by selling it out of its foreign exchange reserves. And in the opposite case, it can buy the currency in the market to increase its reserves. 2When the price of a foreign exchange goes too high, the government may raise the discount rate to absorb foreign fund to increase foreign exchange income of the country and vice versa. 3In case of acute exchange rate fluctuation, a government may have to resort to foreign exchange control or raise foreign loans to make up its balance of payment deficit and lower the demand for foreign exchange.In the Bretton Woods system, international financial crisis was accidental and partial, while in the system in Jamaica, the international financial crisis has become a regular, comprehensive and far-reaching. A small crisis, even major crisis occurred from time to time. With the gold standard-based exchange rate system collapse, the currency in terms of the types and the amounts are greatly increased. Money supply and the growth of deposits were much higher than the growth rate of industrial production, and the development of the national economy has become increasingly dependent on credit.In short, the existing international monetary system was universally regarded as a transitional non-sound system, the need for thorough reform.Zhou Xiaochuan, Chinas central bank governor, predicted that a new super-sovereign reserve currency should replace national reserve currencies as the backbone of the global monetary system. Zhou argued that a new global reserve currency, based on a basket of major currencies, would transcend the national interest of reserve currency printing countries and contribute to the stability of the international financial system and the development of world economy. Actually Zhous argument is just one part of international debates on reforming the global monetary system. Also some economic experts called for a new global reserve system using a broad basket of world currencies as one of the longer-term reforms to rebuild the global monetary system.These leading experts got together to try to identify the key trends that will fashion the international financial system in the years ahead. As history has shown, the evolution of the international monetary system is a slow process. However, I trust that we will be entering a new era in which a combination of factors will have lasting consequences on the functioning of the international monetary system and the future role of the IMF.Im sure the discussion will continue until some other approaches to improve the working of the international system.From my part, I believe that the US dollar must be replaced some day though America tries its best to prevent his national currency from being abandoned. Unfortunately, this is determined by the market to some degree. The dangers of a single-country reserve system have long been recognized, as the accumulation of