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
 

 

• Gross Domestic Product (GDP)--also called Gross Domestic Income (GDI), and Gross National Product (GNP) measure countries' wealth

• Purchasing Power Parity (PPP) is a measure used to compare buying power from market to market

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

#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 the US assumed this role and then helped to rebuild WE and Japan
     

  • How 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
     

• Floating exchange rate system

#4 GN / GS Disparities

Institutions :