https://padlet.com/Alina_Yarmoshchuk/ls8xmvwses1sy68j The Global Financial Sytem and its main features en-us 2022-04-12 20:27:34 UTC 2025-12-09 15:44:21 UTC hello@padlet.com Alina_Yarmoshchuk https://padlet.com/Alina_Yarmoshchuk/ls8xmvwses1sy68j/wish/2141444596 The two key features of the global financial system are, first of all, the international monetary system (IMS), the focus of which is the exchange of national currency for a foreign one, and the global credit system, focusing on the conditions of borrowing money.

Regarding the International Monetary system (IMS) in the aftermath of WW2 two significant changes are worth mentioning: the move from the fixed rates to floating rates, and the growth of regional currencies, resulting in the replacement of the range of national currencies. The move from the fixed rates to floating rates is closely connected to the Triffin's dilemma, which argued that the US will eventually face an issue of an inability to redeem dollars for gold, as there will be more dollars outside of the US, than gold inside, which proved to be true, as in 1971 US broke its link with gold.

Consequently, as a response to the increasing exchange rates instability, Western Europe attempted to create its own zone currency stability, European Monetary System, with the subsequent creation of the ECU, a composite currency for bookkeeping purposes, and ERM, exchange rate mechanism. The creation of these mechanisms has eventually led to the introduction and the adoption of the euro, as a new regional currency. European states were sacrificing their national currency for the guarantees of increased stability and low inflation. Despite the criticism of the adoption of the euro as a new national currency, including concerns regarding the unfitting interest rates and inability to adjust currencies, it was still majorly perceived as a way to strengthen the economic, social, and political bonds between the European states.

The second key feature of the global financial system, the global credit system was to a great extent influenced by technological innovations and repeated financial crises. Among the major innovations was the creation of offshore financial markets, created to avoid certain regulations established by the home country. At the same time innovations in the field of technology resulted in the creation of the possibilities for fast, cheap, and constant communication, which significantly facilitated the process of money transfer operations. On the other hand, the repeated crisis resulted in the questioning of the stability of the global financial system, which consequently has led to the creation of the Financial Stability Forum (FSF) and the Group of Twenty (G20), aiming to address the issues of offshore financial centers, cross border capital flows, hedge funds, as well as to reinforce the legitimacy of the financial reforms, and include the issues od social safety nets, infectious diseases, and the environment and debt relief in the agenda.]]> 2022-04-12 20:27:50 UTC https://padlet.com/Alina_Yarmoshchuk/ls8xmvwses1sy68j/wish/2141444596