Global financial system


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 as International Monetary Fund and Bank for International Settlements, national agencies and government departments, e.g., central banks and finance ministries, and private institutions acting on the global scale, e.g., banks and hedge funds.

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. In Europe, it may have started with the first commodity exchange, the Bruges Bourse in 1309 and the first financiers and banks in the 1400–1600s in central and western Europe. The first global financiers the Fuggers (1487) in Germany; the first stock company in England (Russia Company 1553); the first foreign exchange market (The Royal Exchange 1566, England); the first stock exchange {the Amsterdam Stock Exchange 1602).

Milestones in the history of financial institutions are the Gold Standard (1871–1932), the founding of International Monetary Fund (IMF), World Bank at Bretton Woods, and the abolishment of fixed 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 international balance of payments accounts of member states. The IMF acts as a lender 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 other multilateral development banks and other international financial institutions also play specific regional or functional roles.

* The World Trade Organization (http://www.wto.org/) settles trade disputes and negotiates international trade agreements in its rounds of talks (currently the Doha 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 through discretionary spending. They are closely tied (though in most countries independent of) to central banks that issue government debt, set interest rates and deposit requirements, and intervene in the foreign exchange market.

Private participants

Players acting in the stock-, bond-, foreign exchange-, derivatives- and commodities-markets and investment banking are

* Commercial banks
* Pension funds
* Hedge funds and Private 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 bubble

Criticism, 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


Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Financial System — A financial system can be defined at the global, regional or firm specific level. The firm s financial system is the set of implemented procedures that track the financial activities of the company. On a regional scale, the financial system is… …   Investment dictionary

  • Global Financial Integrity — Création 2006 Type Organisation non gouvernementale Association à but non lucratif Siège 1319 18th Street, NW, Suite 200 Washington, D.C. Langue(s) Anglais Effectifs …   Wikipédia en Français

  • Global financial crisis of September–October 2008 — The global financial crisis of September–October 2008 is a developing financial crisis which emerged the week of September 14, 2008. Beginning with failures of large financial institutions in the United States, it rapidly evolved into a global… …   Wikipedia

  • Commission of Experts on Reforms of the International Monetary and Financial System — The Commission of Experts on Reforms of the International Monetary and Financial System, chaired by Joseph Stiglitz and not to be confused with the concurrent Commission on the Measurement of Economic Performance and Social Progress he also… …   Wikipedia

  • Global justice — is an issue in political philosophy arising from the concern that we do not live in a just world. [Thomas Nagel, The Problem of Global Justice , Philosophy and Public Affairs 33(2005): 113 47. p. 113. An online version of this article is listed… …   Wikipedia

  • Financial contagion — refers to the phenomenon when one country s economy is negatively affected because of changes in the asset prices of another country s financial market. Causes There are many contentions as to the cause(s) of financial contagion; critics claim… …   Wikipedia

  • Financial crisis — For the 2008–2010 crisis, see Subprime mortgage crisis , Late 2000s financial crisis and Late 2000s recession. Economics …   Wikipedia

  • Global city — A global city (also called world city) is a city deemed to be an important node point in the global economic system. The concept comes from geography and urban studies and rests on the idea that globalization can be understood as largely created …   Wikipedia

  • Global Prescience — Looking for a lesson in humility? Stand at a major historical marker, and try drawing a perfectly reasonable, prudent conclusion about where that marker is pointing. Believe me, if you read about a 15th century traveler saying, I have to get back …   Wikipedia

  • Financial Services Authority — The Financial Services Authority ( FSA ) is an independent non governmental body, quasi judicial body and a company limited by guarantee that regulates the financial services industry in the United Kingdom. Its main office is based in Canary… …   Wikipedia


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.