PO232 Lecture Notes - Lecture 9: Financial Services Authority, Core Countries, European Central Bank
Document Summary
Role that usd plays in intl economy lot bigger than share of us economy in global economy. 4 sections for this week: what makes finance unusual as sector n intl econ relative to trade agriculture tourism, liberalization of finance since 70s - characteristics and causes. Intl financial crises - sovereign debt crises ex eurozone crisis, american & global financial crises: role of usd as dominant currency globally. Introduction: finance is special: based heavily on perceptions of reality, risk, uncertainty with respect to future, trust, long-term promises (years), speculation. If govts don"t do this, face consequence that financial system will shut down, terrible for econ growth, employment and re-election process of govt in power. Firms that are too big to fail (and whole financial system is too) Financial market actors know this before crises happen, govt will likely step in: often incline them to take risks they otherwise wouldn"t (loans, borrowing)
