IB 201 Lecture Notes - Lecture 15: Foreign Exchange Market, International Monetary Systems, Reserve Currency
15 Nov 2016
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Document Summary
How does a weaker or stronger dollar affect us firms business. Usd monopoly allows the us to enjoy its long-run deficit and to externalize its debt burden to others: allows the us to use usd as an economic weapon against its geopolitical enemies. Led negative consequence to its own development. One sovereignty currency: the world reserve currency has major problem. Creates fundamental structural problem in the system and it affects the security and sustainability of world monetary system. Fiat monetary system has detached from the world trade and real economy. Big idea: digital currencies are created with block chain technologies. Consists of 4 markets: global equity markets, global debt market, global money market, global foreign exchange market. Why do we need financial markets: efficiently allocate financial resources, channel funds. Export: risk transfer, network of people firms financial institutions and governments lending borrowing and investing internationally.
