世界经济教学资料5.theinternationalmonetarysystem

Internationalmonetarysystem Learningobjectives BefamiliarwiththehistoricaldevelopmentofthemodernglobalmonetarysystemDiscusstheroleplayedbytheWBandtheIMFintheinternationalmonetarysystemBefamiliarwiththedifferencebtwafixedandfloatingexchangeratesystemKnowwhatexchangerateregimesareusedintheworldtodayandwhycountriesadoptdifferentexchangerateregimesUnderstandthedebatesurroundingtheroleoftheIMFinthemanagementoffinancialcrises Whatistheinternationalmonetarysystem Internationalmonetarysystemreferstotheinstitutionalarrangementsthatgovernexchangerates Typesofexchangerate FloatingexchangeratetheforeignexchangemarketdeterminestherelativevalueofacurrencyPeggedexchangeratethevalueofthecurrencyisfixedrelativetoareferencecurrencyFixedexchangeratethevalueofasetofcurrenciesarefixedagainsteachotheratsomemutuallyagreedonexchangerateDirtyfloattrytoholdthevalueofthecurrencywithinsomerangeagainstanimportantreferencecurrency Thegoldstandard PeggingcurrenciestogoldandguaranteeingconvertibilityBy1880 mostoftheworld smajortradingnations includingGreatBritain Germany Japan andtheU S hadadoptedit Thestrengthwasthatitcontainedapowerfulmechanismforachievingbalance of tradeequilibriumbyallcountries Theperiodbtwthewars 1913 1939 Thegoldstandardworkedreasonablywellfromthe1870suntilthestartofWWIin1914whenitwasabandoned TheU S returnedtoitin1919 Itleftitin1933butreturnedin1934 GBreturnedtoitin1925 andsuspendedconvertibilityin1931 Francereturnedin1928 BythestartofWWIIin1939 thegoldstandardwasdead TheBrettonWoodsSystem Representativesfrom44countriesmettodesignanewinternationalmonetarysystemin1944 Therewasconsensusthatfixedexchangeratesweredesirable fornomultinationalinstitutioncouldstopcountriesfromengagingincompetitivedevaluationswiththegoldstandard TheBrettonWoodsSystem Undertheagreement1 allcountriesweretofixthevalueoftheircurrencyintermsofgold butwerenotrequiredtoexchangetheircurrenciesforgold onlythedollarremainedconvertibleintogold atapriceof 35perounce 2 Acommitmentnottousedevaluationasaweaponofcompetitivetradepolicy ThedilemmaoftheU S Fed IftheFedheldtoamonetarypolicyappropriatetothedomesticeconomicsituation itriskedstarvingtheworldeconomyofmonetaryliquidity if ontheotherhand itaccommodatedtheworld sdollarneeds itinviteddomesticinflationandgraduallyunderminedinternationalconfidencethatthedollarwouldretainitsvalue Thatinturncreatedanirresistiblepressuretoconvertdollarstogoldandacrisisforthewholegoldexchangesystem Thus themoretheeconomiesofothernationsgrew themorethisbecameaproblemfortheUnitedStates Thecollapseofthefixedexchangeratesystem AnincreaseintheU S governmentspendingtofinancetheVietnamconflictandwelfareprogram financednotbyanincreaseintaxes butbyanincreaseinthemoneysupplyJapanandWestGermanexportedmoretotheU S Tradebalancebegantodeteriorate TheincreaseininflationandtheworseningoftheU S foreigntradepositiongaverisetospeculationintheforeignexchangemarketthatthedollarwouldbedevalued Oilcrisesin1971 whenOPECquadrupledthepriceofoil Thecollapseofthefixedexchangeratesystem conti Bundesbank Germany scentralbank facedtheinevitableandalloweditscurrencytofloatin1971 PresidentNixonannouncedthatthedollarwasnolongerconvertibleintogoldinAugust1971 Amassivewaveofspeculationin1972 Thefloatingexchangerateregime TheJamaicaAgreementFloatingratesweredeclaredacceptable Goldwasabandonedasareserveasset TotalannualIMFquotaswereincreasedto 41billion Non oil exporting less developedcountriesweregivengreateraccesstoIMFfunds Financialcrisesinthepost BrettonWoodsera Acurrencycrisiswhenaspeculativeattackontheexchangevalueofacurrencyresultsinasharpdepreciationinthevalueofthecurrencyorforceauthoritiestoexpendlargevolumesofinternationalcurrencyreservesandsharplyincreaseinterestratestodefendtheprevailingexchangerate Financialcrisesinthepost BrettonWoodsera cont Abankingcrisisalossofconfidenceinthebankingsystemthatleadstoarunonbanks asindividualandcompanieswithdrawtheirdeposits Aforeigndebtcrisisacountrycannotserviceitsforeigndebtobligations whetherprivate sectororgovernmentdebt TheAsiancrisis EastAsiamiracle export ledgrowthAstoundingratesofgrowthfor3decadeswithoutnoseriouseconomicdownturnspriorto1997StronggovernmentpoliciesExtensivegovernmentinvestmentineducation Facilitatingdomesticinvestmentinkeyindustries EncouragingahighsavingsrateamongcitizensFollowedthedictaoftheWashingtonConsensusandlargelyliberalizedtheireconomy butonagradualandwell sequenced ratherthananabruptandimmediateadoptionofliberalpolicies TheAsiancrisis cont TheinvestmentboomThewealthcreatedbyexport ledgrowthhelpedfuelaninvestmentboomincommercialandresidentialproperty industrialassets andinfrastructure Soaringpriceofcommercialandresidentialrealestate HongKongandBangkok Chaebol sambitioninSouthKoreatobuildamajorpositionintheglobalautomobileandsemiconductorindustriesinaccordancewith nationalgoals and industrializationstrategy Hugeinfrastructureprojectbygovernments TheAsiancrisis cont ExcesscapacityAsthevolumeofinvestmentsballoonedduringthe1990s oftenatthebequestofnationalgovernments thequalityofmanyoftheseinvestmentsdeclinedsignificantly ExcesscapacityinresidentialandcommercialpropertyandinindustriesExpandingimportsImmediatecausesinThailandandSouthKoreacontagion TheroleofIMF ToprovidetheThaigovernmentwith 17 2billioninloans butrequiredtoincreasetaxes cutpublicspending privatizeseveralstate ownedbusiness andraiseinterestrates andtocloseilliquidfinancialinstitutions Toassemblea 37billionrescuedealforIndonesiawithWBandtheAsianDevelopmentbanks buttocloseanumberoftroubledbanks reducepublicspending removegovernmentsubsidiesonbasicfoodstuffsandenergy balancethebudget andunravelthecronycapitalism TheroleofIMF cont Tolend 55billionforSouthKorea buttoopentheireconomyandbankingsystemtoforeigninvestors torestrainthechaebolbyreducingtheirshareofbankfinancingandtopublishconsolidatedfinancialstatementsandundergoannualindependentexternalaudits tocomplywithitscommitmentstotheWTOtoeliminatetrade relatedsubsidiesandrestrictiveimportlicensingandtostreamlineitsimportcertificationprocedures EvaluatingtheIMF spolicyprescriptions InappropriatepoliciesIMF s one size fits all approachtomacroeconomicpolicyisinappropriateformanycountries SouthKorea MoralhazardBanksshouldbeforcedtopaythepricefortheirrashlendingpoliciesLackofaccountabilitylacktheexpertiserequiredtodoagoodjob withouthavingdeepknowledgeoftheinvolvedcountry Financialcrisisin2008 The bubbleburstin2000 therootofthecrisisFeddroppedtheinterestratetoabout2 keepingitextremelylowevenaftertherecessionended leadingtotheaccumulationofinsupportabledebt newlyderegulatedbanksstartedlookingforinnovativewaystoboosttheirbottomline Ahugepopulartorushintohousingmarket Financialcrisisin2008 DeregulatingthebankstheGlass SteagallAct 1933 specificallyprohibitedrisk takingbanksfrominvestingFDIC insuredmoneyinhigh riskventures preventedbanksfrombecoming toobigtofail bykeepingbanksthathaddifferentfunctionsseparate theFinancialServicesModernizationAct 1999 toallowbankstomergewithotherbanksandtoinvesttheirclients moneyinalmostanytypeofventure CommoditiesFutureModernizationAct 2000 expungedallregulationsoncommodityandderivatives makingitillegaleventoattempttoregulatethesehigh riskactivitiestheSecuritiesandExchangeCommission SEC 2004toabandonthe12 1debttoreservesratioforbanks Financialcrisisin2008 LaxregulationNewaccountingstandardspermittedbankstocreate off balance sheet entitiesforcertaininvestments specialinvestmentvehicles SIVs SobankscoulduseSIVstomakeallsortsofdangerouslyriskyinvestmentsthatarehiddeninSIVs off balance sheetentitiesdidnothavetoholdanyreservesagainsttheirsuper riskyinvestments Financialcrisisin2008 Mortgage backedsecuritiesFannieMae mortgageagency SubprimemortgageGiventoaborrowerwhohaspoorcreditorinsufficientincometomakeongoingpaymentsonthemortgage Financialcrisisin2008 MoneyfornothingThebanksinventedatypeofinsurancetheycouldbuytoprotectthemselvesincasetheseriskymortgage backedsecuritiesdefaulted creditdefaultswap CDS Theyusedcomplexmathematicalformulastocreatethestacksofsecurities AAAratingagencies Moody s StandardandPoor s thefewinvestorssoonrealizedtheywere inreality mostlyjunk morecomplexinvestmentvehicle CDO collateralizeddebtobligation tohidethesecurity srisk nearlyallfinancialderivativesareheldinunregulatedconduitsorSIVstohidetheirliabilitiesfrominvestors Financialcrisisin2008 FinancialcollapseDuringthesummerof2007 twosubprimemortgagebondhedgefundsownedbyBearStearns aninvestmentbank wentbrokeItscollapsesentshockwavesthroughthefinancialsystem AfterthedemiseofLehmanBrothersandthecontinuingcollapseofsubprimemortgages thebanksfelllikedominoes Citigroup MorganStanley GoldmanSachs MerrillLynch AIGwereallintrouble Financialcrisisin2008 Banksstoppedtrustingeachotherandstoppedlendingtobusinessesbothlargeandsmall Astheseloansdriedup thecreditcrunchsqueezedthelifebloodoftheeconomy Thecountry andtheworld wasplungedintotheGreatRecession Governmentresponse TroubledAssetReliefProgram TARP inDec 2008 700billionplusinbailoutmoneywouldbuythebanks toxicassetsforfarmorethanthemortgage backedsecuritieswereworth TARPbillincludedsomeoversightpro