Class Notes - Chapters 9-11 THE CRISIS OF 2008- Economic...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapters 9-11 THE CRISIS OF 2008- Economic Crisis of 2008 * Downturn began in the US * Home Mortgage Crisis * Bank Crisis * Led to global banking crisis * Global stock markets tumbled dramatically as a result of the crisis * Unemployment rate increased worldwide- 9.7% in US by March 2010 * What began as a US financial market trouble ended as global financial meltdown. MONEY- Money medium of exchange * Precious metal (gold, silver,..) standard- Currency * Today, international monetary system is divorced from any tangible medium such as precious metals * State prints its own money a hallmark of state sovereignty * Politics standard- The inevitable inflation * Value of currencies- Taxation- Exchange rate CURRENCIES- Convertible (hard) versus non-convertible currencies * Need convertible currency for conducting international trade- ex. Former Soviet Union, North Korea..- Hard Currency * Money that can be readily converted to leading world currency (which have relatively low inflation) * States maintain reserves of hard currency INTERNATIONAL CURRENCY EXCHANGE- Exchange rates often express in terms of the worlds most important (hard) currencies: * U.S. dollar * Japanese yen * EUs euro * Other currencies (Brazilian reals) depends on the value of each, relative to these world currencies * Exchange rates that most affect the world economy are those within the G7 states U.S. dollar, euro, yen, British pounds, and Canadian dollars CURRENCY EXCHANGE- Changes in the value over time are meaningful * Value of euro rises (or falls) relative to the dollar, because Euros are considered more (or less) valuable than before, the euro is said to be strong (weak) * Fixed exchange rates * Floating exchange rates * Managed float system snake in a tunnel * Government intervention in the currency market- Coordinated multinational intervention- Pegging: Argentina, China, and Hong Kong WHY CURRENCIES RISE AND FALL- Short term, exchange rates depend on speculative demand and supply of currencies- Long term, because of changes in the long-term real supply and demand of the currencies countries current account balance * Strong vs. weak currency- Non-economic reasons - Overvalued currency- Devaluation * As a policy: the case of china? MONETARY AND FISCAL POLICIES- Monetary policy: how much money to print * Carried out by the state mostly through the central bank * Interest Rate- Fiscal Policy: how much to tax and how much to spend * Government revenue and expenditures * Tax rate * States obligations * Redistribution/entitlement * Interference in the economy * Deficit Spending INTERNATIONAL FINANCIAL INSTITUTIONS- Created near the end of WW2 * The Bretton Woods system (1944)- International Bank for Reconstruction and Development (World Bank)- International Monetary Fund (IMF)- ITO-GATT-WTO THE WORLD BANK AND THE IMF- International Monetary Fund (IMF) * Coordinates international currency exchange, the balance of international payments, and national accounts...
View Full Document

This note was uploaded on 01/24/2012 for the course INTA 1110 taught by Professor Tba during the Spring '08 term at Georgia Institute of Technology.

Page1 / 11

Class Notes - Chapters 9-11 THE CRISIS OF 2008- Economic...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online