Global Financial System

Since the global financial system is an interdependent system, the first question before us is where to start, which angles offer observers the deepest insights into the global financial system, which bring into focus those components whose evolution can be traced over a significant span of time, and whose role in the global financial system have helped pave the way for growth in its size and interdependence.  A financial system is a framework that facilitates financial transactions, and these transactions require an accepted form of money, something that can serve as a medium of exchange, a unit of account, a store of wealth, and a standard of deferred payment.  The swelling ranks of corporations, propelled by speculative fever, searching the globe for markets and raw materials, brought the added momentum needed for the development of a global financial system, but for it to freely run its course a world monetary system was necessary.  Trade itself can function, on the basis of batter, and credit agreements can be individually negotiated under a barter system if political entities exist that can enforce contracts.  The global financial system begins with an explanation of the functional framework for studying the financial system and a discussion of the six major functions the system performs.  The IMF, the World Bank, and the BIS all have unique roles in international financial system.  The IMF promotes exchange rates stability, oversees the international financial system, and lends to member countries experiencing temporary balance of payments deficits.  The World Bank promotes the economic development of the world’s poorest countries by raising funds to make development loans.  The BIS acts as a bank for central banks and seeks to establish and monitor international reporting and capital standards for financial institutions and to assist countries in developing safe and sound financial practices.  The FSF, consisting of representatives of central banks, monetary authorities, and international financial institutions, meets regularly to exchange information and foster cooperation in financial surveillance and supervision in order to promote global financial stability.