- Global financial system
The global financial system (GFS) is a
financial system consisting of institutions and regulations that act on the international level, as opposed to those that act on a national or regional level. The main players are the global institutions, such asInternational Monetary Fund andBank for International Settlements , national agencies and government departments, e.g.,central bank s and finance ministries, and private institutions acting on the global scale, e.g.,bank s andhedge fund s.Deficiencies and reform of the GFS have been hotly discussed in recent years.
History
The history of financial institutions must be differentiated from
economic history and history of money. InEurope , it may have started with the firstcommodity exchange , the Bruges Bourse in 1309 and the firstfinancier s andbank s in the 1400–1600s in central and western Europe. The first global financiers theFugger s (1487) in Germany; the first stock company in England (Russia Company 1553); the first foreign exchange market (The Royal Exchange 1566, England); the firststock exchange {theAmsterdam Stock Exchange 1602).Milestones in the history of financial institutions are the
Gold Standard (1871–1932), the founding ofInternational Monetary Fund (IMF), World Bank at Bretton Woods, and the abolishment offixed exchange rates in 1973.Institutions
International institutions
The most prominent international institutions are the IMF, the World Bank and the WTO:
* The
International Monetary Fund (http://www.imf.org/) keeps account of internationalbalance of payments accounts of member states. The IMF acts as alender of last resort for members in financial distress, e.g.,currency crisis , problems meeting balance of payment when in deficit and debt default. Membership is based on quotas, or the amount of money a country provides to the fund relative to the size of its role in the international trading system.* The
World Bank (http://www.worldbank.org/) aims to provide funding, take up credit risk or offer favorable terms to development projects mostly in developing countries that couldn't be obtained by the private sector. The othermultilateral development banks and otherinternational financial institution s also play specific regional or functional roles.* The
World Trade Organization (http://www.wto.org/) settlestrade dispute s and negotiates international trade agreements in its rounds of talks (currently theDoha Round )Government institutions
Governments act in various ways as actors in the GFS: they pass the laws and regulations for
financial markets and set the tax burden for private players, e.g., banks, funds and exchanges. They also participate actively throughdiscretionary spending . They are closely tied (though in most countries independent of) tocentral bank s that issuegovernment debt , setinterest rate s anddeposit requirement s, and intervene in theforeign exchange market .Private participants
Players acting in the
stock -, bond-, foreign exchange-, derivatives- andcommodities -markets andinvestment bank ing are* Commercial
bank s
*Pension fund s
*Hedge fund s andPrivate Equity Legal frameworks and treatises
*
Eurozone
*North American Free Trade Agreement (NAFTA)
*Mercosur
*Commonwealth of Independent States (CIS)Perspectives
There are three primary approaches to viewing and understanding the global financial system.
The liberal view holds that the exchange of currencies should be determined not by state institutions but instead individual players at a market level. This view has been labelled as the
Washington Consensus . This view is challenged by a social democratic front which advocates the tempering of market mechanisms, and instituting economic safeguards in an attempt to ensure financial stability and redistribution. Examples include slowing down the rate of financial transactions, or enforcing regulations on the behaviour of private firms. Outside of this contention of authority and the individual, neoMarxists are highly critical of the modern financial system in that it promotes inequality between state players, particularly holding the view that the political North abuse the financial system to exercise control of developing countries' economies.Major incidents
The most current incidents in the GFS are the
Asian financial crisis , the following devaluations in Russia, Brazil and Argentina and the bursting of the Dot-Com bubbleCriticism, discussions and reform
Among the many critics of the GFS are:
* The
ATTAC network
*Joseph Stiglitz
*George Soros
*Stefan G. Dunbar ee also
*
Trade bloc
*Finance
*Financial economics
*Globalization
*List of finance topics
*List of international trade topics
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