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The financial crisis: The need for a new system

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  1. Introduction
  2. History and principles of money issuing
    1. The apparition of the money
    2. The money today
    3. The apparition of the money creation
    4. Theories
    5. On what ground rules should money creation be submitted?
    6. The Bank of France
    7. The Federal Reserve
  3. The monetary creation power abandonment to the commercial banks
    1. The choice of States
    2. The consequences of this change
    3. The cost of capital
  4. The reasons for these choices in modern economies
    1. A regulatory authority
    2. The rarity of money
    3. The need not to hinder the market
  5. Money control and public financing
    1. The monetary creation principles
    2. Consequences
    3. Could the French State be debt-free?
    4. What if States can fund the Central
    5. Is there a way to pay-back public debts ?
  6. The Financial Crisis
    1. Conjectural reasons
    2. Structural reasons
    3. Consequences and learning
  7. The necessity of a new system
    1. Need for a change
    2. Towards a new economic order
  8. Conclusion

This thesis is about our (the world's) monetary and financial system. It starts by focusing on monetary creation, which is the basis of our financial system. After defining the monetary creation process, it is about its control, which has been transferred from the States to the Central Banks and then to the Commercial Banks. It explores the reasons of these changes and the situation it created, particularly regarding the public debts that started at one point of time and which have kept on growing ever since. After defining this problem, it explores the possibility for a Central Bank to finance the State's investments at zero interest rate, like it was the case when it had this right. This study will show that this model is viable, and would allow the collectivity to pay back the public debt and lower the taxes at the same time. After this, this thesis will go over the financial crisis that the world has been going through in the past couple of years, and will find its reasons. It highlights the conjectural causes that started it, and also the structural reasons, that can be retrieved in the past crises this financial world has been through. It will explain how today's financial system is, by nature, unstable. The successive waves of deregulation that has blown over the liberal economies we are living in made it this way. This will lead us to analyze what the actual problems are in our financial and monetary systems, and where some reforms need to be implemented in order to make our financial world more stable and more reliable. Finally, it offers a concrete direction to take, in order to meliorate it. This starts with the idea of a Central bank, in every State and monetary union, which would be given (back) the monetary creation control. Today, commercial banks, which control it, are responsible for the economic stability, without bearing this charge. This Central bank would have the economic stability as a charge, and would be the only establishment allowed to create money. It would have the possibility to finance the State's investments at no interest rate. The banking industry would be split into three independent entities that would be deposit, lending and investment, this will be in order to strengthen the banking system. In addition to that, stock markets have to be more regulated, passing intraday quotations from day to day, banishing trading softwares and forbidding banks to speculate for themselves. These reforms will take time to implement and will face many interests, but at the end, they will benefit the collectivity.

[...] For the past decades, a wave of deregulation has blow over the financial world, involving the disappearance of any obstacle to the free movement of goods, services and capital. According to this theory, the disappearance of all obstacles to these movements would be both necessary and sufficient for optimal allocation of resources throughout the world condition. Every country and every social group would see their situation improved. Market was seen as 64 likely to lead to a stable balance, completely effective, that could operate on a global scale. [...]

[...] 5 The financial crisis: the need for a new system? 6 Introduction "The truth about the public debt". This is the name of a website I visited while surfing the Internet. It immediately caught my attention. I feel concerned about the public debt and have thought several times about how States end up so deep in debt. It is a major problem most of the States in the world are facing today. Worst, this problem gets bigger and bigger every year. [...]

[...] All difficulties result from the lack of a fundamental fact, is that a decentralized system of market economy can't work properly if creating uncontrolled scratch new means of payment 62 allows you to escape, at least for a time, the necessary adjustments. It is so whenever it can't fulfill its expenditure or its debts with simple promises to pay, without any actual counterparty. In this situation, all experts are looking for resources, or even of expedients, out of difficulties, but no real agreement is realized on defined and effective solutions. [...]

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