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POLI 243 (112)
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Lecture

poli 243 lec 18th feb.rtf

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Department
Political Science
Course
POLI 243
Professor
Mark Brawley
Semester
Winter

Description
midterm : theories, evidence, explanation 18th feb a national govt. issuing currency, to attract/promote it as an intl. medium of exchange Key currencies : Advantages competitive edge in financial services : better financial position bargaining leverage over other states : if foreigners in need of intl. money can only get it from your citizens, then the govt. can exercise sovereignty and control who can handle these transactions, who can enter border etc. Having everyone else use your money gives govt. power over outside actors ability to run trade deficits : others would take your money. E.g. US, difference made by paying its own money out. The country gets an advantage of dealing with deficit problems impetus for outward foreign investment : individuals have advantage of going out, establishing their firms outside the country. FDI wherein a firm buys an existing business Disadvantages : currency "overhang" : to get everyone interested in using your currency is challenging , you're trying to push enough money to help international economy. You can't force others to use it, people have to believe that its gonna be worth something in the future. A need to develop confidence among actors in intl economy. Too much paper money/credit in the system that you have reserve asset (overhang). One of the reasons why Bretton Woods system breaks down. US demonstrating : if there is no backing to US dollar, people have confidence because they think they'd spend it in US. That would cause an inflationary surge. trade deficit can get too big constraint on domestic options : how do you manage this currency (domestic vs intl concerns). 2008 financial meltdown, in order to stimulate econ. recovery, make interests low so people can borrow easily. Pus
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