POLI 243 notes Feb 17

POLI 243 notes Feb 17 - Feb 17, 2009 POLI 243: Econ...

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Feb 17, 2009 POLI 243: Econ Relations The Politics of International Monetary Relations Key Currencies, the Exchange Rate, and Domestic Politics An International Money - The money have broad confidence: people must think it has value today, and will be useful in the future (restrict the supply so people cherish it) - It has to be available in enough amounts to actually be useful - Who would manage the confidence/liquidity balance? o Currency is a promise that you will be able to receive a certain amount of goods/services (etc.) in exchange for the money – how can we ensure that they will maintain value? o National money as an international medium of exchange: Key Currencies Key Currencies/Top currencies (right now = U.S. dollars) - Advantages: o Commercial edge in financial services o Bargaining leverage over other states If citizens of other countries spend your countries’ currency (e.g. U.S. dollars), they must have bank accounts in your country – therefore you can freeze it if they do illegal things, etc. so you have some control over them If someone wants to borrow money, they must come to you – so you control what they get; you can cut them off or encourage them to do things
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POLI 243 notes Feb 17 - Feb 17, 2009 POLI 243: Econ...

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