International monetary systems

An international monetary system is a set of internationally agreed rules, conventions and supporting institutions that facilitate international trade, cross border investment and generally the reallocation of capital between nation states. It should provide means of payment acceptable to buyers and sellers of different nationalities, including deferred payment. To operate successfully, it needs to inspire confidence, to provide sufficient liquidity for fluctuating levels of trade, and to provide means by which global imbalances can be corrected. The system can grow organically as the collective result of numerous individual agreements between international economic factors spread over several decades. Alternatively, it can arise from a single architectural vision, as happened at Bretton Woods in 1944.

Historical overview

Throughout history, precious metals such as gold and silver have been used for trade, sometimes in the form of bullion, and from early history the coins of various issuers – generally kingdoms and empires – have been traded. The earliest known records of pre-coinage use of precious metals for monetary exchange are from Mesopotamia and Egypt, dating from the third millennium BC.[1] Early money took many forms, apart from bullion; for instance bronze spade money which became common in Zhou dynasty China in the late 7th century BC. At that time, forms of money were also developed in Lydia in Asia Minor, from where its use spread to nearby Greek cities and later to many other places.[1]

Sometimes formal monetary systems have been imposed by regional rulers. For example, scholars have tentatively suggested that the Roman king Servius Tullius created a primitive monetary system in the early history of Rome. Tullius reigned in the sixth century BC - several centuries before Rome is believed to have developed a formal coinage system.[2]

As with bullion, early use of coinage is believed to have been generally the preserve of the elite. But by about the 4th century BC coins were widely used in Greek cities. They were generally supported by the city state authorities, who endeavoured to ensure they retained their values regardless of fluctuations in the availability of whatever base or precious metals they were made from.[1] From Greece the use of coins spread slowly westwards throughout Europe, and eastwards to India. Coins were in use in India from about 400 BC; initially they played a greater role in religion than in trade, but by the 2nd century they had become central to commercial transactions. Monetary systems that were developed in India were so successful that they spread through parts of Asia well into the Middle Ages.[1]

As a variety of coins became common within a region, they were exchanged by moneychangers, the predecessors of today's foreign exchange market, as mentioned in the Biblical story of Jesus and the money changers. In Venice and the other Italian city states of the early Middle Ages, money changers would often have to struggle to perform calculations involving six or more currencies. This partly led to Fibonacci writing his Liber Abaci which popularised the use of Indo-Arabic numerals, which displaced the more difficult Roman numerals then in use by western merchants.[3]

International money montage
Historic international currencies. From top left: crystalline gold, a 5th-century BCE Persian daric, an 8th-century English mancus, and an 18th-century Spanish real.

When a given nation or empire has achieved regional hegemony, its currency has been a basis for international trade, and hence for a de facto monetary system. In the West – Europe and the Middle East – an early such coin was the Persian daric. This was succeeded by Roman currency of the Roman Empire, such as the denarius, then the Gold Dinar of the Ottoman Empire, and later – from the 16th to 20th centuries, during the Age of Imperialism – by the currency of European colonial powers: the Spanish dollar, the Dutch guilder, the French franc and the British pound sterling; at times one currency has been pre-eminent, at times no one dominated. With the growth of American power, the US dollar became the basis for the international monetary system, formalised in the Bretton Woods agreement that established the post–World War II monetary order, with fixed exchange rates of other currencies to the dollar, and convertibility of the dollar into gold. The Bretton Woods system broke down, culminating in the Nixon shock of 1971, ending convertibility; but the US dollar has remained the de facto basis of the world monetary system, though no longer de jure, with various European currencies and the Japanese yen also being prominent in foreign exchange markets. Since the formation of the Euro, the Euro has also gained use as a reserve currency and a medium of transactions, though the dollar has remained the most important currency.

A dominant currency may be used directly or indirectly by other nations: for example, English kings minted the gold mancus, presumably to function as dinars to exchange with Islamic Spain; colonial powers sometimes minted coins that resembled those already used in a distant territory; and more recently, a number of nations have used the US dollar as their local currency, a custom called dollarization.

Until the 19th century, the global monetary system was loosely linked at best, with Europe, the Americas, India and China (among others) having largely separate economies, and hence monetary systems were regional. European colonization of the Americas, starting with the Spanish empire, led to the integration of American and European economies and monetary systems, and European colonization of Asia led to the dominance of European currencies, notably the British pound sterling in the 19th century, succeeded by the US dollar in the 20th century. Some, such as Michael Hudson, foresee the decline of a single base for the global monetary system, and the emergence instead of regional trade blocs; he cites the emergence of the Euro as an example. See also Global financial systems, world-systems approach and polarity in international relations. It was in the later half of the 19th century that a monetary system with close to universal global participation emerged, based on the gold standard.

History of modern global monetary orders

The pre WWI financial order: 1816–1919

Gold Bars
The gold standard widely adopted in this era rested on the conversion of paper notes into pre-set quantities of gold.

From the 1816 to the outbreak of World War I in 1914, the world benefited from a well-integrated financial order, sometimes known as the "first age of globalisation".[4] [5] There were monetary unions which enabled member countries to accept each other's currencies as legal tender. Such unions included the Latin Monetary Union (Belgium, Italy, Switzerland, France) and the Scandinavian monetary union (Denmark, Norway and Sweden). In the absence of shared membership of a union, transactions were facilitated by widespread participation in the gold standard, by both independent nations and their colonies. Great Britain was at the time the world's pre-eminent financial, imperial, and industrial power, ruling more of the world and exporting more capital as a percentage of her national income than any other creditor nation has since.[6]

While capital controls comparable to the Bretton Woods system were not in place, damaging capital flows were far less common than they were to be in the post 1971 era. In fact Great Britain's capital exports helped to correct global imbalances as they tended to be counter-cyclical, rising when Britain's economy went into recession, thus compensating other states for income lost from export of goods.[7] Accordingly, this era saw mostly steady growth and a relatively low level of financial crises. In contrast to the Bretton Woods system, the pre–World War I financial order was not created at a single high level conference; rather it evolved organically in a series of discrete steps. The Gilded Age, a time of especially rapid development in North America, falls into this period.

Between the World Wars: 1919–1939

This era saw periods of worldwide economic hardship. The image is Dorothea Lange's Migrant Mother depiction of destitute pea-pickers in California, taken in March 1936.

The years between the world wars have been described as a period of "de-globalisation", as both international trade and capital flows shrank compared to the period before World War I. During World War I, countries had abandoned the gold standard. Except for the United States, they later returned to it only briefly. By the early 1930s, the prevailing order was essentially a fragmented system of floating exchange rates.[8] In this era, the experience of Great Britain and others was that the gold standard ran counter to the need to retain domestic policy autonomy. To protect their reserves of gold, countries would sometimes need to raise interest rates and generally follow a deflationary policy. The greatest need for this could arise in a downturn, just when leaders would have preferred to lower rates to encourage growth. Economist Nicholas Davenport [9] had even argued that the wish to return Britain to the gold standard "sprang from a sadistic desire by the Bankers to inflict pain on the British working class."

By the end of World War I, Great Britain was heavily indebted to the United States, allowing the US to largely displace it as the world's foremost financial power. The United States, however, was reluctant to assume Great Britain's leadership role, partly due to isolationist influences and a focus on domestic concerns. In contrast to Great Britain in the previous era, capital exports from the US were not countercyclical. They expanded rapidly with the United States' economic growth in the 1920s until 1928, but then almost completely halted as the US economy began slowing in that year. As the Great Depression intensified in 1930, financial institutions were hit hard along with trade; in 1930 alone, 1345 US banks collapsed. [10] During the 1930s, the United States raised trade barriers, refused to act as an international lender of last resort, and refused calls to cancel war debts, all of which further aggravated economic hardship for other countries. According to economist John Maynard Keynes, another factor contributing to the turbulent economic performance of this era was the insistence of French premier Clemenceau that Germany pay war reparations at too high a level, which Keynes described in his book The Economic Consequences of the Peace.

The Bretton Woods Era: 1944–1973

British and American policy makers began to plan the post-war international monetary system in the early 1940s. The objective was to create an order that combined the benefits of an integrated and relatively liberal international system with the freedom for governments to pursue domestic policies aimed at promoting full employment and social wellbeing.[11] The principal architects of the new system, John Maynard Keynes and Harry Dexter White, created a plan which was endorsed by the 42 countries attending the 1944 Bretton Woods conference, formally known as the United Nations Monetary and Financial Conference. The plan involved nations agreeing to a system of fixed but adjustable exchange rates so that the currencies were pegged against the dollar, with the dollar itself convertible into gold. So in effect this was a gold – dollar exchange standard. There were a number of improvements on the old gold standard. Two international institutions, the International Monetary Fund (IMF) and the World Bank were created. A key part of their function was to replace private finance as a more reliable source of lending for investment projects in developing states. At the time the soon to be defeated powers of Germany and Japan were envisaged as states soon to be in need of such development, and there was a desire from both the US and Britain not to see the defeated powers saddled with punitive sanctions that would inflict lasting pain on future generations. The new exchange rate system allowed countries facing economic hardship to devalue their currencies by up to 10% against the dollar (more if approved by the IMF) – thus they would not be forced to undergo deflation to stay in the gold standard. A system of capital controls was introduced to protect countries from the damaging effects of capital flight and to allow countries to pursue independent macro economic policies [12] while still welcoming flows intended for productive investment. Keynes had argued against the dollar having such a central role in the monetary system, and suggested an international currency called bancor be used instead, but he was overruled by the Americans. Towards the end of the Bretton Woods era, the central role of the dollar became a problem as international demand eventually forced the US to run a persistent trade deficit, which undermined confidence in the dollar. This, together with the emergence of a parallel market for gold in which the price soared above the official US mandated price, led to speculators running down the US gold reserves. Even when convertibility was restricted to nations only, some, notably France,[13] continued building up hoards of gold at the expense of the US. Eventually these pressures caused President Nixon to end all convertibility into gold on 15 August 1973. This event marked the effective end of the Bretton Woods system; attempts were made to find other mechanisms to preserve the fixed exchange rates over the next few years, but they were not successful, resulting in a system of floating exchange rates.[13]

The post Bretton Woods system: 1973– present

The New York Stock Exchange. The current era has seen huge and turbulent flows of capital between nations.

An alternative name for the post Bretton Woods system is the Washington Consensus. While the name was coined in 1989, the associated economic system came into effect years earlier: according to economic historian Lord Skidelsky the Washington Consensus is generally seen as spanning 1980–2009 (the latter half of the 1970s being a transitional period).[14] The transition away from Bretton Woods was marked by a switch from a state led to a market led system.[4] The Bretton Wood system is considered by economic historians to have broken down in the 1970s:[14] crucial events being Nixon suspending the dollar's convertibility into gold in 1973, the United States' abandonment of capital controls in 1974, and the UK's ending of capital controls in 1979 which was swiftly copied by most other major economies.

In some parts of the developing world, liberalisation brought significant benefits for large sections of the population – most prominently with Deng Xiaoping's reforms in China since 1978 and the liberalisation of India after its 1991 crisis.

Generally the industrial nations experienced much slower growth and higher unemployment than in the previous era, and according to Professor Gordon Fletcher in retrospect the 1950s and 60s when the Bretton Woods system was operating came to be seen as a golden age. [15] Financial crises have been more intense and have increased in frequency by about 300% – with the damaging effects prior to 2008 being chiefly felt in the emerging economies. On the positive side, at least until 2008 investors have frequently achieved very high rates of return, with salaries and bonuses in the financial sector reaching record levels.

The "Revived Bretton Woods system" identified in 2003

International monetary systems over two centuries[16]
Date System Reserve assets Leaders
1803–1873 Bimetallism Gold, silver France, UK
1873–1914 Gold standard Gold, pound UK
1914–1924 Anchored dollar standard Gold, dollar US, UK, France
1924–1933 Gold standard Gold, dollar, pound US, UK, France
1933–1971 Anchored dollar standard Gold, dollar US, G-10
1971–1973 Dollar standard Dollar US
1973–1985 Flexible exchange rates Dollar, mark, pound US, Germany, Japan
1985–1999 Managed exchange rates Dollar, mark, yen US, G7, IMF
1999- Dollar, euro Dollar, euro, yen US, Eurozone, IMF

From 2004, economists such as Michael P. Dooley, Peter M. Garber, and David Folkerts-Landau began writing papers describing the emergence of a new international system involving an interdependency between states with generally high savings in Asia lending and exporting to western states with generally high spending.[17] Similar to the original Bretton Woods, this included Asian currencies being pegged to the dollar, though this time by the unilateral intervention of Asian governments in the currency market to stop their currencies appreciating. The developing world as a whole stopped running current account deficits in 1999 [18] – widely seen as a response to unsympathetic treatment following the 1997 Asian Financial Crisis. The most striking example of east-west interdependency is the relationship between China and America, which Niall Ferguson calls Chimerica. From 2004, This supposed "New Bretton Woods",[19] as a "fiction", and called for the elimination of the structural imbalances that underlie it, viz, the chronic US current account deficit.[20]

However, since at least 2007 those authors have also called for a new de jure system: for key international financial institutions like the IMF and World Bank to be revamped to meet the demands of the current age,[21] and between 2008 and mid-2009 the term New Bretton Woods was increasingly used in the latter sense. By late 2009, with less emphases on structural reform to the international monetary system and more attention being paid to issues such as re-balancing the world economy.

Since 2011, Sanjeev Sanyal, a colleague of Dooley, Garber and Folkerts-Landau has taken the framework a step further to argue that periods of global economic expansions are almost always underpinned by symbiotic imbalances. Such imbalances cause distortions but are an inevitable part of expanding economic ecosystems. Thus, he argues that the next round of economic growth will again be underpinned by a return to global imbalances, probably with China supplying capital and the US again running deficits to absorb it. He names this relationship Bretton Woods III.[22]

Calls for a "New Bretton Woods"

Leading financial journalist Martin Wolf has reported that all financial crises since 1971 have been preceded by large capital inflows into affected regions. While ever since the seventies there have been numerous calls from the global justice movement for a revamped international system to tackle the problem of unfettered capital flows, it was not until late 2008 that this idea began to receive substantial support from leading politicians. On September 26, 2008, French President Nicolas Sarkozy, then also the President of the European Union, said, "We must rethink the financial system from scratch, as at Bretton Woods."[23]

On October 13, 2008, British Prime Minister Gordon Brown [24] said world leaders must meet to agree to a new economic system:

We must have a new Bretton Woods, building a new international financial architecture for the years ahead.

However, Brown's approach was quite different from the original Bretton Woods system, emphasising the continuation of globalization and free trade as opposed to a return to fixed exchange rates.[25] There were tensions between Brown and Sarkozy, who argued that the "Anglo-Saxon" model of unrestrained markets had failed.[26] However European leaders were united in calling for a "Bretton Woods II" summit to redesign the world's financial architecture.[27] President Bush was agreeable to the calls, and the resulting meeting was the 2008 G-20 Washington summit. International agreement was achieved for the common adoption of Keynesian fiscal stimulus,[28] an area where the US and China were to emerge as the world's leading actors.[29] Yet there was no substantial progress towards reforming the international financial system, and nor was there at the 2009 meeting of the World Economic Forum at Davos [30]

Despite this lack of results leaders continued to campaign for Bretton Woods II. Italian Economics Minister Giulio Tremonti said that Italy would use its 2009 G7 chairmanship to push for a "New Bretton Woods." He had been critical of the U.S.'s response to the global financial crisis of 2008, and had suggested that the dollar may be superseded as the base currency of the Bretton Woods system.[31] [32] [33]

Choike, a portal organisation representing Southern Hemisphere NGOs, called for the establishment of "international permanent and binding mechanisms of control over capital flows" and as of March 2009 had achieved over 550 signatories from civil society organisations. [34]

Competing ideas for the next international monetary system
System Reserve assets Leaders
Flexible exchange rates[35] Dollar, euro, renminbi US, Eurozone, China
Special drawing rights standard[36] SDR US, G-20, IMF
Gold standard[37] Gold, dollar US
Delhi Declaration[38][39] Currency basket BRICS

March 2009 saw Gordon Brown continuing to advocate for reform and the granting of extended powers to international financial institutions like the IMF at the April G20 summit in London, [40] and was said to have president Obama's support .[41] Also during March 2009, in a speech entitled Reform the International Monetary System, Zhou Xiaochuan, the governor of the People's Bank of China came out in favour of Keynes's idea of a centrally managed global reserve currency. Dr Zhou argued that it was unfortunate that part of the reason for the Bretton Woods system breaking down was the failure to adopt Keynes's bancor. Dr Zhou said that national currencies were unsuitable for use as global reserve currencies as a result of the Triffin dilemma – the difficulty faced by reserve currency issuers in trying to simultaneously achieve their domestic monetary policy goals and meet other countries' demand for reserve currency. Dr Zhou proposed a gradual move towards increased use of IMF special drawing rights (SDRs) as a centrally managed global reserve currency [42] [43] His proposal attracted much international attention.[44] In a November 2009 article published in Foreign Affairs magazine, economist C. Fred Bergsten argued that Dr Zhou's suggestion or a similar change to the international monetary system would be in the United States' best interests as well as the rest of the world's.[45]

Leaders meeting in April at the 2009 G-20 London summit agreed to allow $250 Billion of SDRs to be created by the IMF, to be distributed to all IMF members according to each countries voting rights. In the aftermath of the summit, Gordon Brown declared "the Washington Consensus is over".[46] However, in a book published during September 2009, Professor Robert Skidelsky, an international expert on Keynesianism, argued it was still too early to say whether a new international monetary system was emerging.[14]

On Jan 27, in his opening address to the 2010 World Economic Forum in Davos, President Sarkozy repeated his call for a new Bretton Woods, and was met by wild applause by a sizeable proportion of the audience.[47]

In December 2011, the Bank of England published a paper arguing for reform, saying that the current International monetary system has performed poorly compared to the Bretton Woods system. [48]

In August 2012 in an International Herald Tribune op-ed, Harvard University professor and director of the Committee on Capital Markets Regulation Hal S. Scott called for a global response to the Euro-zone crisis. He wrote that two failures to address European problems around German power had led to world wars in the 20th century and that the current crisis was also beyond the capacity of Europe, with Germany again at the center, to solve on their own. Accepting that leadership transitions were underway in both China and America, Scott called on all concerned—with Japan included with China and America—to begin organizing a global restructuring through the International Monetary Fund with possibly a Bretton Woods II conference as part of the process. [49] MarketWatch commentator Darrell Delamaide endorsed Scott's idea but concluded "unfortunately it’s not likely to happen". He added first the example of the failure of Europe to address successfully the breakup of Yugoslavia without outside assistance as a reason for his endorsement. But he found U.S. presidential and Treasury Department leadership and IMF leadership dramatically lacking in the capacity to mount an initiative such as Scott proposed. [50]

See also


  1. ^ a b c d Jonathan Williams with Joe Cribb and Elizabeth Errington, ed. (1997). Money a History. British Museum Press. pp. 16–27, 111, 127, 131, 136, 136, . ISBN 0-7141-0885-5.
  2. ^ Raaflaub, Kurt (2005). Social Struggles in Archaic Rome. WileyBlackwell. pp. 59–60. ISBN 1-4051-0061-3.
  3. ^ "The Ascent of Money , episode 1". PBS.
  4. ^ a b Ravenhill, John (2005). Global Political Economy. Oxford University Press. pp. 7, 328.
  5. ^ Occasionally also called the golden age of capitalism in older sources, and also the first golden age of capitalism in later sources that recognise golden age that spanned approx 1951–73. A few economists such as Barry Eichengreen date the first age of globalisation as starting in the early 1860s with the laying of the first transatlantic cables between Great Britain and the USA.
  6. ^ Harold James. The End of Globalization. Harvard University Press / Google books. p. 12. Retrieved 2009-03-17.
  7. ^ Helleiner, Eirc (2005). "6". In John Ravenhill (ed.). Global Political Economy. Oxford University Press. p. 154.
  8. ^ Helleiner, Eirc (2005). "6". In John Ravenhill (ed.). Global Political Economy. Oxford University Press. p. 156.
  9. ^ Skidelsky, Robert (2003). "22". John Maynard Keynes: 1883-1946: Economist,Philosopher, Statesman. Macmillan. p. 346.
  10. ^ Stephen J. Lee. Aspects of European history, 1789-1980. Routledge / Google books. p. 135. Retrieved 2009-03-17.
  11. ^ Helleiner, Eric (1996). "2: Bretton Woods and the Endorsement of Capital Controls". States and the reemergence of global finance. Cornell University Press.
  12. ^ According to Keynes: "In my view the whole management of the domestic economy depends on being free to have the appropriate rate of interest without reference to rates prevailing elsewhere in the world. Capital control is a corollary to this"
  13. ^ a b Laurence Copeland. Exchange Rates and International Finance (4th ed.). Prentice Hall. pp. 10–35. ISBN 0-273-68306-3.
  14. ^ a b c Robert Skidelsky (2009). Keynes: The return of the Master. Allen Lane. pp. 116–126. ISBN 978-1-84614-258-1.
  15. ^ Fletcher, Gordon (1989). "Introduction". The Keynesian Revolution and Its Critics: Issues of Theory and Policy for the Monetary Production Economy. Palgrave MacMillan. pp. xx.
  16. ^ Source: International Monetary Reform 2011 Presentation at the China G-20 Seminar, Nanjing PRC, March 31, 2011 by Robert Mundell
  17. ^ Dooley, Michael P.; Folkerts‐Landau, David; Garber, Peter (2004). "The Revived Bretton Woods System". International Journal of Finance and Economics. 9 (4): 307–313. doi:10.1002/ijfe.250.
  18. ^ Wolf, Martin (2009). "3". Fixing Global Finance. Yale University Press. p. 39.
  19. ^ *Robert Brenner, "What is Good for Goldman Sachs is Good for America The Origins of the Present Crisis" (October 2, 2009). Center for Social Theory and Comparative History. Paper 2009-1. [1], p 14f.
  20. ^ Renegade Economics: The Bretton Woods II Fiction, by Chris P. Dialynas and Marshall Auerback, PIMCO
  21. ^ Michael P. Dooley; David Folkerts-Landau; Peter Garber (June 2007). "The Two Crises of International Economics". National Bureau of Economic Research.
  22. ^
  23. ^ George Parker; Tony Barber; Daniel Dombey (October 9, 2008). "Senior figures call for new Bretton Woods ahead of Bank/Fund meetings". Archived from the original on October 14, 2008.
  24. ^ Agence France-Presse (AFP) (October 13, 2008). "World needs new Bretton Woods, says Brown". Archived from the original on October 18, 2008.
  25. ^ Gordon Brown (October 13, 2008). "PM's Speech on the Global Economy". eGov monitor. Archived from the original on September 11, 2009.
  26. ^ James Kirkup; Bruno Waterfield (2008-10-17). "Gordon Brown's Bretton Woods summit call risks spat with Nicholas Sarkozy". London: The Daily Telegraph. Retrieved 2008-11-16.
  27. ^ "European call for 'Bretton Woods II'". Financial Times. 2008-10-16. Retrieved 2009-03-17.
  28. ^ Chris Giles in London, Ralph Atkins in Frankfurt and,Krishna Guha in Washington. "The undeniable shift to Keynes". The Financial Times. Retrieved 2009-01-23.CS1 maint: Multiple names: authors list (link)
  29. ^ "US and China display united economic stance". Financial Times. 2009-07-29. Retrieved 2009-08-05.
  30. ^ Martin Wolf. "Why Davos Man is waiting for Obama to save him". The Financial Times. Retrieved 2008-02-12.
  31. ^ "Italy queries dollar's role in Bretton Woods reform". Reuters. 2008-10-16. Retrieved 2008-11-16.
  32. ^ Parmy Olson; Miriam Marcus (2008-10-16). "Bringing The Banking Mess To Broadway". Forbes. Retrieved 2008-11-16.
  33. ^ Guy Dinmore (2008-10-08). "Giulio Tremonti: A critic demands a new Bretton Woods". Financial Times. Archived from the original on 2009-05-06. Retrieved 2008-11-16.
  34. ^ various - including Action Aid, War on Want, World Council of Churches. "Let's put finance in its place!". Choike. Retrieved 2009-03-18.CS1 maint: Multiple names: authors list (link)
  35. ^ Mansoor Dailami (September 7, 2011). "The New Triumvirate". Foreign Policy.
  36. ^ David Bosco (September 7, 2011). "Dreaming of SDRs". Foreign Policy.
  37. ^ Jessica Naziri (September 1, 2011). "Gold standard comeback enjoys support". CNBC.
  38. ^ "Fourth BRICS Summit - Delhi Declaration". Indian Ministry of External Affairs. March 29, 2012.
  39. ^ Mitul Kotecha (April 14, 2011). "Guest post: Rupee can serve as a reserve currency too". Financial Times.
  40. ^ Edmund Conway (2009-01-30). "Gordon Brown warns of void left by collapse of global financial system". London: The Daily Telegraph. Retrieved 2009-03-17.
  41. ^ George Parker; Andrew Ward in Washington (2009-03-04). "Brown wins Obama's support for a shake-up of global regulation". Financial Times. Retrieved 2009-03-17.
  42. ^ Jamil Anderlini in Beijing (2009-03-23). "China calls for new reserve currency". Financial Times. Retrieved 2009-04-13.
  43. ^ Zhou Xiaochuan (2009-03-23). "Reform the International Monetary System". People's Bank of China. Archived from the original on March 27, 2009. Retrieved 2009-04-13.
  44. ^ Geoff Dyer in Beijing (2009-08-24). "The dragon stirs". The Financial Times. Retrieved 2009-09-18.
  45. ^ C. Fred Bergsten (Nov 2009). "The Dollar and the Deficits". Foreign Affairs. Retrieved 2009-12-15.
  46. ^ "Prime Minister Gordon Brown: G20 Will Pump Trillion Dollars Into World Economy". Sky News. 2 April 2009.
  47. ^ Gillian Tett (2010-01-28). "Calls for a new Bretton Woods not so mad". Financial Times. Retrieved 2010-01-29.
  48. ^ Oliver Bush; Katie Farrant; Michelle Wright (2011-12-09). "Reform of the International Monetary and Financial System" (PDF). Bank of England. Retrieved 2011-12-15.
  49. ^ Scott, Hal S. (2012-08-15). "The Global (Not Euro-Zone) Crisis". International Herald Tribune. Retrieved 2012-08-16.
  50. ^ Delamaide, Darrell (2012-08-16). "Timid U.S., IMF leaving Europe in the lurch". MarketWatch. Retrieved 2012-08-16.

External links

Agnès Bénassy-Quéré

Agnès Bénassy-Quéré (born March 15, 1966) is a French economist and Professor of Economics at the Paris School of Economics.

Balance of payments

The balance of payments, also known as balance of international payments and abbreviated B.O.P. or BoP, of a country is the record of all economic transactions between the residents of the country and the rest of the world in a particular period of time (e.g. a quarter of a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country. It is an important issue to be studied, especially in international financial management field, for a few reasons.

First, the balance of payments provides detailed information concerning the demand and supply of a country's currency. For example, if Sudan imports more than it exports, then this means that the quantity supplied of Sudanese pounds by the domestic market is likely to exceed the quantity demanded in the foreign exchanging market, ceteris paribus. One can thus infer that the Sudanese pound would be under pressure to depreciate against other currencies. On the other hand, if Sudan exports more than it imports, then the Sudanese pound would be likely to appreciate.

Second, a country's balance of payments data may signal its potential as a business partner for the rest of the world. If a country is grappling with a major balance of payments difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to impose measures to restrict imports and discourage capital outflows in order to improve the balance of payments situation. On the other hand, a country with a significant balance of payments surplus would be more likely to expand imports, offering marketing opportunities for foreign enterprises, and less likely to impose foreign exchange restrictions.

Third, balance of payments data can be used to evaluate the performance of the country in international economic competition. Suppose a country is experiencing trade deficits year after year. This trade data may then signal that the country's domestic industries lack international competitiveness.

To interpret balance of payments data properly, it is necessary to understand how the balance of payments account is constructed.

These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. It is prepared in a single currency, typically the domestic currency for the country concerned. The balance of payments accounts keep systematic records of all the economic transactions (visible and non-visible) of a country with all other countries in the given time period. In the BoP accounts, all the receipts from abroad are recorded as credit and all the payments to abroad are debits. Since the accounts are maintained by double entry bookkeeping, they show the balance of payments accounts are always balanced. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items.

When all components of the BoP accounts are included they must sum to zero with no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down currency reserves or by receiving loans from other countries.

While the overall BoP accounts will always balance when all types of payments are included, imbalances are possible on individual elements of the BoP, such as the current account, the capital account excluding the central bank's reserve account, or the sum of the two. Imbalances in the latter sum can result in surplus countries accumulating wealth, while deficit nations become increasingly indebted. The term "balance of payments" often refers to this sum: a country's balance of payments is said to be in surplus (equivalently, the balance of payments is positive) by a specific amount if sources of funds (such as export goods sold and bonds sold) exceed uses of funds (such as paying for imported goods and paying for foreign bonds purchased) by that amount. There is said to be a balance of payments deficit (the balance of payments is said to be negative) if the former are less than the latter. A BoP surplus (or deficit) is accompanied by an accumulation (or decumulation) of foreign exchange reserves by the central bank.

Under a fixed exchange rate system, the central bank accommodates those flows by buying up any net inflow of funds into the country or by providing foreign currency funds to the foreign exchange market to match any international outflow of funds, thus preventing the funds flows from affecting the exchange rate between the country's currency and other currencies. Then the net change per year in the central bank's foreign exchange reserves is sometimes called the balance of payments surplus or deficit. Alternatives to a fixed exchange rate system include a managed float where some changes of exchange rates are allowed, or at the other extreme a purely floating exchange rate (also known as a purely flexible exchange rate). With a pure float the central bank does not intervene at all to protect or devalue its currency, allowing the rate to be set by the market, the central bank's foreign exchange reserves do not change, and the balance of payments is always zero.


In trade, barter (derived from baretor) is a system of exchange where participants in a transaction directly exchange goods or services for other goods or services without using a medium of exchange, such as money. Economists distinguish barter from gift economies in many ways; barter, for example, features immediate reciprocal exchange, not delayed in time. Barter usually takes place on a bilateral basis, but may be multilateral (i.e., mediated through a trade exchange). In most developed countries, barter usually only exists parallel to monetary systems to a very limited extent. Market actors use barter as a replacement for money as the method of exchange in times of monetary crisis, such as when currency becomes unstable (e.g., hyperinflation or a deflationary spiral) or simply unavailable for conducting commerce.

Economists since the times of Adam Smith (1723-1790), looking at non-specific pre-modern societies as examples, have used the inefficiency of barter to explain the emergence of money, of "the" economy, and hence of the discipline of economics itself. However, ethnographic studies have shown that no present or past society has used barter without any other medium of exchange or measurement, nor have anthropologists found evidence that money emerged from barter, instead finding that gift-giving (credit extended on a personal basis with an inter-personal balance maintained over the long term) was the most usual means of exchange of goods and services.

Bretton Woods Conference

The Bretton Woods Conference, formally known as the United Nations Monetary and Financial Conference, was the gathering of 730 delegates from all 44 Allied nations at the Mount Washington Hotel, situated in Bretton Woods, New Hampshire (July 1–22,1944), United States, to regulate the international monetary and financial order after the conclusion of World War II.The conference was held from July 1 to 22, 1944. Agreements were signed that, after legislative ratification by member governments, established the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF).

Charles Knickerbocker Harley

Charles Knickerbocker Harley is an academic economic historian who has written on a wide range of topics including the British industrial revolution, the late nineteenth century international economy, and the impact of technological change. He is a practitioner of the New Economic History.At Harvard he studied under Alexander Gerschenkron. He completed his dissertation, Shipbuilding and Shipping in the Late Nineteenth Century, on the transition from wooden sailing ships to steel steamers, in 1972. He took a professorship at the University of British Columbia. In 1978 he moved to the University of Western Ontario. In 2005 he joined the faculty of St. Antony's College, Oxford, where he stayed until becoming an Emeritus Fellow in 2011.He has been a frequent collaborator with N.F.R. Crafts.He has been awarded The Cliometric Society's Clio Can in 1999 in recognition of his exceptional support of cliometrics and the Arthur H. Cole Prize by the Journal of Economic History, for his essay, "British Industrialization Before 1841: Evidence of Slower Growth During the Industrial Revolution".

Ernesto Cordero Arroyo

Ernesto Javier Cordero Arroyo is a Mexican politician (born on May 9, 1968). He is an actuary, a public servant and a Mexican politician affiliated with the “Partido Acción Nacional (National Action Party, PAN").

He has been Secretary of State in two different occasions: he was Secretary of Social Development, and Finance Secretary, when he resigned to take part in the internal elections for the Presidency of Mexico for the PAN. Currently, he is the President of the Mexican Senate.

History of Scandinavia

The history of Scandinavia is the history of the geographical region of Scandinavia and its peoples. The region is in northern Europe, and consists of Denmark, Norway, and Sweden. Finland and Iceland are at times, especially in English-speaking contexts, considered part of Scandinavia.

Illinois Trade Association

The Illinois Trade Association was a trade clearinghouse based in Lincolnwood, IL, open to all businesses in the state of Illinois. ITA was founded in 1983 by Jack Schacht and Joan Varner.

Illinois Trade Association was sold to International Monetary Systems, Ltd. (IMS Barter) in 2006.Today, IMS Barter is a business-to-business barter exchange serving over 16,000 member businesses in the United States and Canada.

International finance

International finance (also referred to as international monetary economics or international macroeconomics) is the branch of financial economics broadly concerned with monetary and macroeconomic interrelations between two or more countries. International finance examines the dynamics of the global financial system, international monetary systems, balance of payments, exchange rates, foreign direct investment, and how these topics relate to international trade.Sometimes referred to as multinational finance, international finance is additionally concerned with matters of international financial management. Investors and multinational corporations must assess and manage international risks such as political risk and foreign exchange risk, including transaction exposure, economic exposure, and translation exposure.Some examples of key concepts within international finance are the Mundell–Fleming model, the optimum currency area theory, purchasing power parity, interest rate parity, and the international Fisher effect. Whereas the study of international trade makes use of mostly microeconomic concepts, international finance research investigates predominantly macroeconomic concepts.

The three major components setting international finance apart from its purely domestic counterpart are as follows:

Foreign exchange and political risks.

Market imperfections.

Expanded opportunity sets.These major dimensions of international finance largely stem from the fact that sovereign nations have the right and power to issue currencies, formulate their own economic policies, impose taxes, and regulate movement of people, goods, and capital across their borders.The term "international finance" is sometimes also used as an anti-Semitic code word.

Max Corden

Warner Max Corden (born 13 August 1927) is an Australian economist. He is mostly known for his work on the theory of trade protection, including the development of the dutch disease model of international trade. He has also been active in the fields of international monetary systems, macroeconomic policies of developing countries and Australian economics. Corden, originally German, emigrated from Nazi Germany to Melbourne in 1939.

Monetary system

A monetary system is the set of institutions by which a government provides money in a country's economy. Modern monetary systems usually consist of the national treasury, the mint, the central banks and commercial banks.

Outline of globalization

The following outline is provided as an overview of and topical guide to the broad, interdisciplinary subject of globalization:

Globalization (or globalisation) – processes of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Advances in transportation and telecommunications infrastructure, including the rise of the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities. Globalizing processes affect and are affected by business and work organization, economics, socio-cultural resources, and the natural environment.

Polarity (international relations)

Polarity in international relations is any of the various ways in which power is distributed within the international system. It describes the nature of the international system at any given period of time. One generally distinguishes three types of systems: unipolarity, bipolarity, and multipolarity for four or more centers of power. The type of system is completely dependent on the distribution of power and influence of states in a region or globally.

It is widely believed amongst theorists in international relations that the post-Cold War international system is unipolar: The United States’ defense spending is “close to half of global military expenditures; a blue-water navy superior to all others combined; a chance at a powerful nuclear first strike over its erstwhile foe, Russia; a defense research and development budget that is 80 percent of the total defense expenditures of its most obvious future competitor, China; and unmatched global power-projection capabilities.”

Political positions of Marine Le Pen

Marine Le Pen is a French politician, who is the President of the National Front (FN). During her political career she has expressed her positions on a wide range of political issues covering economics, immigration, social issues, and foreign policy. She has stated that as the FN's immigration policies are better known to voters, she focuses her campaigning on the party's economic and social programme.Described as more democratic and republican than her nationalist father Jean-Marie Le Pen, the previous leader of the FN, she has attempted to detoxify and soften the party's image, based on reformulation of policy positions, and expulsion of members accused of racism, antisemitism, or pétainism, including her father. Marine Le Pen has also relaxed some political positions of the party, advocating for civil unions for same-sex couples instead of her party's previous opposition to legal recognition of same-sex partnerships, accepting unconditional abortion and withdrawing the death penalty from her platform.On economic policy, Le Pen favours protectionism as an alternative to free trade. She supports economic nationalism, the separation of investment and retail banking, and energy diversification, and is opposed to the privatization of public services and social security, speculation on international commodity markets, and the Common Agricultural Policy.Le Pen is opposed to globalization, which she blames for various negative economic trends, and opposes European Union supranationalism and federalism, instead favouring a loosely confederate 'Europe of the Nations'. She has called for France to leave the Eurozone, and a referendum on France leaving the EU. She has been a vocal opponent of the Treaty of Lisbon, and opposes EU membership for Turkey and Ukraine. Le Pen has pledged to take France out of NATO and the US sphere of influence. She proposes the replacement of the World Trade Organization, and the abolition of the International Monetary Fund.Le Pen and the NF claim that multiculturalism has failed, and argue for the "de-Islamisation" of French society. Le Pen has called for a moratorium on legal immigration. She would repeal laws allowing illegal immigrants to become legal residents, and argues for benefits provided to immigrants to be reduced to remove incentives for new immigrants. Following the beginning of the Arab Spring and the European migrant crisis, she called for France to withdraw from the Schengen Area and reinstate border controls.On foreign policy, Le Pen supports the establishment of a privileged partnership with Russia, and states that Ukraine has been "subjugated" by the United States. She is strongly critical of NATO policy in the region, Eastern European anti-Russian sentiment, and threats of economic sanctions.

Scandinavian Monetary Union

The Scandinavian Monetary Union was a monetary union formed by Denmark and the Swedish part of the Union between Sweden and Norway on 5 May 1873, by fixing their currencies against gold at par to each other. After the dissolution of the Swedish-Norwegian union, in 1905, Norway continued to be a part of this monetary union. The union ended with the outbreak of World War I.Norway, which was in union with Sweden, however with full inner autonomy, entered the union two years later, in 1875, by pegging its currency to gold at the same level as Denmark and Sweden, 2.48 kroner/kronor per gram of gold, or roughly 0.403 grams per krone/krona. An equal valued krone/krona of the monetary union replaced the three legacy currencies at the rate of 1 krone/krona = ​1⁄2 Danish rigsdaler = ​1⁄4 Norwegian speciedaler = 1 Swedish riksdaler. The monetary union was one of the few tangible results of the Scandinavian political movement of the 19th century.

In the "World Currency" of its time, British pounds, 1 pound was roughly equal to = 18 Kroner. The ratio connecting the Scandinavian currencies to the Latin Monetary Union was 0.72 Krone for 1 French Franc.

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