4 important things to know about the IMS
#1 What it is:
The International Monetary System (IMS) is the means for exchanging currency or money between countries
#2 The IMS is highly interdependent:
2009: $1.9 T flowed between countries daily
As much as $700 T/yr flows through the system
2/3 of that goes through banking centers in just 4 countries
50% of that goes through just one city
Economic crisis in one country can result in contagion
- Mexico 'Tequila Crisis' 1994
- 'Asian Flu' Crisis 1997
- Russian 'Ruble Crisis' 1998
- Argentina 2001
- US/ Europe 2008
#3 The IMS is a Western-induced phenomenon
History:
British domination, European colonization
US assumes economic hegemon, post WWII
Why do you think the US assumed this role and then helped to rebuild WE and Japan?
How do you think the US went about helping to rebuild WE and Japan?
Short-term adjustments for long-term rewards
1971-US could no longer support the system unilaterally
Problems leading up to 1971
Nixon responds
#4 GN / GS Disparities
Institutions :
A) International Monetary Fund (IMF)
Created at the Bretton Woods with the Bretton Woods Agreement in 1944
B) International Bank for Reconstruction and Development (IBRD) aka World Bank (WB)
Created at the Bretton Woods with the Bretton Woods Agreement in 1944
C) Group of 8 (G-8)
Created as result of US need to coordinate policies with restabilized western allies
D) European Union (EU)
Regional intergovernmental organization that ensures/reinforces European economic power
Historical Advantages:
A) Industrial Revolution
B) Colonization