The international monetary and finance structure - Essay Example

The International Monetary and Finance Structure: Connection between Chapter 7 and the Lecture Issues Commonly Featuring in boththe Lectures And Chapter 7: The international monetary and finance structure affects both individual and the society through various ways. It is through the flow of the international currencies to economies that affect the rules under which institutions are formed and governed, while also determining the success of businesses (IMFS 126). The structure of the international monetary and finance affects the political relationships between countries globally, thus explaining why the powerful countries are able to exert their authority and power over the less developed and less influential countries in the world.

This power of political influence emanates from the fact that the rules governing institutions emanates from both the state interactions and the conditions prevailing in the markets, thus making the political influence a substantial tool in determining how the rules regarding monetary exchanges are informed, even in countries outside the jurisdiction of the country with stronger currencies (IMFS 142). While taking care of the market conditions, the countries with stronger currencies, power and influence are therefore able to have their interests predominantly reflected within the international monetary and finance structure, explaining why the USA is a key player in the international financial markets.

Thus, the power of cultural influence of the USA all over the world is not only a function of its being a superpower, but also the ability to be the major player in the international financial and monetary market structure (IMFS 132). Simply put therefore, it is through the international monetary and finance structure, that countries are able to meet their political, economic and social objectives, while international peace, prosperity and development is also determined by the same (IMFS 138).

The international monetary and finance structure does not only influence how the financial markets and the economies of countries operate, but it has a powerful impact on the social and political dimensions of the countries. Therefore, it is through this structure that the concept of International Political Economy (IPE) stems, bringing about the increased interdependence, communication and interactions among countries, thus developing the need for globalization and integration of the markets between countries (IMFS 144).

The International Monetary Fund (IMF) and the World Bank, popularly referred to as the Bretton Woods institutions, play a major role in facilitating an orderly international monetary and investment process. International trade, investment and access to credit are some of the major functions of the international monetary structure, which are then directly related to the political and social influence of countries, determined through the exchange rates of one country’s currency to the other (IMFS 127).

Foreign exchange determines how much of a country’s currency can be bought using the other country’s currency, operating under speculation, to determine the values of hot money, which is the foreign securities and bonds moving in and out of a country very quickly, and are not regulated by the state. The value of any currency is determined by the market forces of demand and supply, but the role of the Central Bank and of the Governments of countries is to intervene in the foreign exchange market through monetary policies, to prevent either inflation or deflation within the country (IMFS 135).

A high demand of a certain currency causes it to appreciate in value, while a low demand causes it to lose its value, thus high demand of a country’s currency indicates that its goods, services and assets are highly demanded by other counties and a low demand shows a less demand of the same, which affects the balance of trade, creating a disparity between the value of exports and value of imports (IMFS 139). Issues in Chapter 7 that are Missing from the Lecture The issue of the impending weakness of the US currency, as anticipated in the future is missing in the lecture, while featuring prominently in Chapter 7.

According to this chapter, the excessive spending by both the USA government and the USA consumers is likely to cause an influx of the US currency globally, thus leading to the depreciation of its value (IMFS 147). Another issue that is present in chapter 7, but missing in the lectures is the issue of differentiating the two perspectives of the International Political Economy, where Bretton Woods’ institutions are performing two diverse roles to different countries of the world (IMFS 143). While regulating the global financial exchange markets for stability to the rest of the world, the institutions are part of a power and influence tools to other countries.

The major powers in the world have taken advantage of the IMF and the World Bank, which were initially meant to create harmony and avert future global financial crisis, to serve as major platforms through which they derive and exert power of influence to other countries (IMFS, 146). Since such powers as the USA and the UK holds influential powers over the World Bank and the IMF, they have utilized the same to introduce policies that have granted them more dominance in the world, in the economic, political and social spheres.

Works Cited The international monetary and finance structure (IMFS), (Chapter 7). Lecture Notes