REFORMATIONOF WORLD MONETARY
AND FINANCIAL SYSTEM INGLOBALIZATION
Kuchukova Nurilya
Doctor of Economics, Professor, Academician of IAI and IEAE,
Eurasian National University named after L.N.Gumilev, Kazakhstan
Annotation
The primary objectives of research are an exposure of global challenges and problems of functioning of the world monetary-financial system and development of practical recommendations on their decision.
The research methodology. On the basis of research, systematization, generalization, analysis of theoretical and practical material on functioning of the world monetary-financial system in the major developed countries of the world, euro zone countriesand developing economies ofproposed measuresto reform theinternational monetary systemand improve themanagement ofglobal economic andfinancial systems.
Value of work and research results. Strategy of providing of world financial stability in the age of globalization and concrete mechanisms of its practical realization are offered in the article.
The essence of author’s practical recommendations and offered mechanism of providing of world financial stability is reducedto the necessity ofcreating a " Financial stability fund of the world economy" for the sustainable operation ofa new globalreserve currency. The amount of paymentsto the Fundmay vary from10% of GDP(for poor countries) to 20% of GDP (for the rich countries).There are alsomechanisms for participationin the formationof theFund'slarge transnational companies(TNCs),transnational banks(TNB). The whole system offormation, distributionand use of the" Financial stability fund of the world economy"must beextremelytransparent. IMF is necessary annually to report before the UNO and the headsof all the countriesof the world(about 200 countries) about forming and use of facilities of this Fund.
On a sample calculation, the supposed contribution of " financial stability fund of the world economy" can make about $ 6 - 12 Trillion, whereas the world of GDP makes about $ 60 Trillion. This Fund will serve as the "safety cushion " for the world economy and providing of stable functioning of a new world key currency created originally on the basis of multicurrency standard on principle of special drawing rights (SDR) and European Currency Unit ( ECU).
Keywords: world monetary and financial system, reformation, globalization.
In the last two decades of international financial markets, practice of functioning shows that growing mobility of capitals at global level along with positive influence showing up in increasing the liquidity of markets and promoting economic growth, generates simultaneously row of new problems in functioning of the world financial system:
1)Floatingexchange rates even under the conditionof thecountry'shealthy economicand financial policiesdo not guaranteeit againsta suddensag, and then no lessdramatictidesof "hot"short-term speculativemoney, and related phenomena such asoverheatingand instability. For the developing states and countries with a transitional economy liberalization of capital hides in itself a large danger. As a result in periods of financial and economic crises the inevitably nascent capital export in forming markets puts them before a dangerous choice: or constantly to excite interest rates, to retain a foreign capital, and at the same time and rate of exchange, weakening to the same an economic general in a country, or to assume a fall in a currency exchange also with all negative consequences for a national economy.
2)Free moving of financial resources and easy access to the external borrowing in combination with the unsteady financial system, finally lead to the exacerbation of crisis situation of backflow.
3)Financial globalization strengthens financial interdependence of all countries, including Russia and Kazakhstan, as a result increasing quickly the volume of international financial transactions and global capital flow with the use of variety of financial instruments under act of modern electronic technologies, facilities of communications and information.
4)Its potential instability increases together with globalization of financial markets(nowadays it is enough to press a few keys on the keyboard of computer and a sum of money moved from one country into another).
5)Liberalization and deregulation of inter-country capital flow, the streams of that repeatedly increased under act of globalization, generated the new phenomenon, is the negative affecting national economy of rapid inflow of foreign investments foremost short-term and highly liquid.
It is impossible not to mark global challenges and problems that exist in functioning of the world monetary system, that is taken to the following:
1) Convertibility of dollar in gold provided legitimacy of dollar as leader of all world currency system, but when this exchange was forbidden,and dollar is not in order. From the legal point of view, Bretton Woods’ rules accepted in 1944, were broken .
2) Today it is uncontroversial that the existing presently system of emission of world currency is uncontrolled, undemocratic and illegal. Financial shocks that test the practically all countries of the world are convincing proof of imperfection of the world monetary system, basis of that the dollar of the USA serves as.
3) " overshoot " in financial system of the USA hundreds of billions dollars can provoke the systemic financial crisis at the international level in future
4) According to David Rosenberg – a former economist of Bank of America - Merrull Lynch, the world was flooded by $ 222,5 trillion debt of private and public sectors, that is equivalent to 362%% of GDP in the world . At all levels of society in the most industrially developed countries there are too much debts and too small profits, which is necessary for their payment" [1, c.17].
5) Financial problems of European countries, deficit of the state budget, an enormous external debt will be rendered strong influence on economic recovery of ЕС. Therefore there are grounds to expect the origin of new-wave of crisis in the world economy.
The data of the analysis(table 1) conducted by us, testify that a national debt on the major developed countries of the world, countries of euro zone and developing economies of the world is had a tendency to the height in 2010 than in 2008 both in an absolute sum and in percents to GDP. In particular, the national debt of the USA grew from 38% of GDP in 2008 to 62% in 2010, in Japan accordingly: from 172% to 198%; in Germany - from 66% to 83%; in Italy - from 106% to 119%; in France - from 68% to 82%, Great Britain - from 52% to 76%; To Spain - from 41% to 60%; To Greece - from 97% to 143%; in Netherlands - from 58% to 63%; To Belgium - 90% to 101%.
Thus in a prospect situation with a state debt ,a number of countries will not become better, the forecast national debt was testified the reference book of CIA,2011. In particular, some increasing of national debt is forecast in percents to GDP by 2016 in comparison with 2011: to Japan - from 233,1% in 2011 to 253,8% in 2016; To France - from 86,8% to 87,7%; The USA - 100,0% to 115,4%; To Portugal - from 106,0% to 110,5%; To Spain - from 67,4% to 77,4%; To Ireland - from 109,3% to 114,3%.
Some decline of national debt in percents to GDP is forecast in a prospect on: to Canada - from 84,1% in 2011 to 72,9% in 2016; To Italy - from 121,1% to 114,1%; To Iceland - from 101,2% to 82,5%; To India - from 62,4% to 59,7%; To the European union - from 82,3% to 79,5%; To Greece - from 165,5% to 162,8%;
To Germany - from 82,6% to 75,0% Hungary - from 76,1% to 71,5%; To Great Britain - from 80,7% in 2011 to 80,4% in 2016. [2, reference Book of CIA 2011].
Table 1 - National debt on the countries of the world
Country / State debt on 2010 (billion of USD) / % GDP / Per man(USD) / State debt on 2008The USA / 9133 / 62% / 29158 / (5415, 38%)
Japan / 8512 / 198% / 67303 / (7469, 172%)
Germany / 2446 / 83% / 30024 / (1931, 66%)
Italy / 2113 / 119% / 34627 / (1933, 106%)
India / 2107 / 52% / 1772 / (1863, 56%)
China / 1907 / 19% / 1427 / (1247, 16%)
France / 1767 / 82% / 27,062 / (1453, 68%)
Great Britain / 1654 / 76% / 26375 / (1158, 52%)
Brazil / 1281 / 59% / 6299 / (775, 39%)
Canada / 1117 / 84% / 32829 / (831, 64%)
Spain / 823 / 60% / 17598 / (571, 41%)
Mexico / 577 / 37% / 5071 / (561, 36%)
Greece / 454 / 143% / 42216 / (335, 97%)
Netherlands / 424 / 63% / 25152 / (392, 58%)
Turkey / 411 / 43% / 5218 / (362, 40%)
Belgium / 398 / 101% / 38139 / (350, 90%)
Egypt / 398 / 80% / 4846 / (385, 87%)
Poland / 381 / 53% / 9907 / (303, 45%)
South Korea / 331 / 23% / 6793 / (326, 24%)
Singapore / 309 / 106% / 65144
Chinese Republic / 279 / 34% / 12075
Source: reference Book of CIA 2011
Global financial and economic crisis bared a break between a financial sphere and real sector. The overheating of financial markets and before all mortgage became, as one of the factors of bankruptcy of some international banks. Surmounting the crisis in many countries the stagnation of bank credit and complication of "bad credits restructuring " is still steady.
Essentially «sovereignization of private debts" was happened: the states forced to undertake considerable part of banks and corporations debts. The expensive anti-recessionary policy, and frequently the unbalanced pre-crisis growth of social obligations,led to record budget deficits.
Data analysis of " Budgetary bulletin " January, 2012 allow to draw the conclusion that practically all countries of the world in a crisis 2008-2010 the deficit of budget rapidly grew: all over the world - from 2,0% to 5,5%; to the countries with the developed economy - from 3,8% to 7,6%; To the United States - from 6,7% to 10,5%; To the euro zone - from 2,12% to 6,3%; To France - from 3,3% to 7,1%; To Germany - from 0,1% to 4,3%; To Italy - from 2,7% to 4,5%; To Spain - from 4,2% to 9,3%; To Japan - from 4,7% to 9,3%; To the United Kingdom - from 4,9% to 9,9%; To Canada - from 0,1% to 5,6%; countries with the formed market - from 0,4% to 3,6% [3].
Кrasavina L.N., honored scientist of Russian Federation, doctor of economics, professor , marks justly that the "Global financial and economic crisis brought to the new touch of Jamaican monetary system, educed its inability to provide relative stability of currency-economic relations in the world. In this regard discussions activated the reformation of currency dispensation. Thus they went out from scientific circles and appeared in the spotlight of presidents and prime ministers of a series of countries and international economic forums of "G20", system measures sanctified to making on an exit from a global financial and economic crisis. President of Russian Federation Medvedev D.A. suggested to conduct an international conference on the problems of world currency-financial device [1]"[4, p. 48] .
Coming forward on the IV th Economic forum in Astana , May 3, 2011[2], President of the Republic of Kazakhstan Nursultan Nazarbayev accented the special attention on three basic sectors: financial, industrially-innovative and resource-food which stand before the world economy today .
The challenges of the financial sector consist in imperfectness of global financial system and its basic component - world key currency. Exactly the existent monetary-financial system, not answering principles of legality and democratic character, weakens a height, distorts macroeconomic principles, mixes to work out nascent global problems.
Imperfection of the world monetary system already force some countries to undertake practical steps for the use of alternative currencies. In the end all economies of the world will come to the necessity of creation and introduction of supranational unit of account, and then and global currency of fundamentally new class.
In this connection, he suggested to work out so-called "road map" on switching to a new world currency. According to his opinion, the creation of new world key currency will allow to range transparent clear to all global monetary-financial system. And on the whole it will allow to fix the prospects of future economic development.To Germany - from 82,6% to 75,0% Hungary - from 76,1% to 71,5%; To Great Britain - from 80,7% in 2011 to 80,4% in 2016. [2, reference Book of CIA 2011].
To Germany - from 82,6% to 75,0% Hungary - from 76,1% to 71,5%; To Great Britain - from 80,7% in 2011 to 80,4% in 2016. [2, reference Book of CIA 2011].
Undeniable fact that it was the first Nursultan Nazarbayev undertook boldness first from the politicians in the world scale, to show publicly the fundamental injustice of current device of world finances to the world, moreover, showed "impudence of responsibility" the persistent and successive appeals to the discussion and joint search of fundamental ways of reformation world financial and economic systems that undoubtedly will serve basis for fundamental reforms of world economic device in behalf on more just, to the human and democratic model [5,6,7,8,9].
It is impossible not to say and that today as never sharply before all humanity the problem of social injustice in society, huge break of standard of living got up between rich and poor people on t, he planet, the main vices of capitalism came to light outside, to what the hearths of instability testify even in the developed countries of the world.
Consequently, life requires changing the paradigm of economic development objectively,
as humanity appeared not able to provide steady and forward economic development of life on all planet. All more often in the economic system there are failures, so-called world financial and economic crises, thus they began to come more often, and to embrace all planet, and the terms of their life became longer.
Exactly the decision of this superunique and most superdifficult problem, in our opinion, all minds of humanity must today immediately engage and not only politicians and scientists-economists but also all progressive humanity of the world.
Generally known, that world economic crises arise up first in financial sphere. By guilt there are the so-called "financial bubbles" arising up as a result of forming of risk fictitious capital during realization of various financial operations at the fund market that, as a result for the counted minutes leading financial magnates operating at this market can become the possessors of huge financial assets and incomes.
Unhealthy global trend is the fact that today many developed countries of the world began to consume more than to produce material welfares, i.e. to live on credit due to other countries of the world. The debt crisis hit many countries including USA, Japan, Great Britain, Italy, Ireland, Spain, Portugal, Greece etc. The point is that the fiscal deficits of these countries are easily covered by the produced governments of these countries by bonds, that are for sale at the fund market and bought by investors, both private and public, both internal and external. As a result there is pumping of economy empty money that does not work on real economy, and spin at the fund market, creating a fictitious capital and causing the crisis phenomena in the economic system.
Undoubtedly, all these difficult economic phenomena are in the world, and rendering the main direct influence on development of national economies of other countries, including Russia and Kazakhstan, need deep comprehension and research, in fact science always develops under influence of practical necessities of society and for satisfaction of his certain needs.
The crisis phenomena always generate the different projects of reformation of the world monetary system. For example, in the conditions of crisis of Bretton Woods System the projects of creation of collective key currency came into question stormily, producing of the common world currency provided with gold and commodities, increase of role of gold in the international monetary system up to renewal of gold standard [10,11].
Processes of globalizations require from Heads of the states and world financial community of increase of efficiency of adjusting of the world monetary and financial system at an international level, that will allow to minimize affecting of the external crisis phenomena national economies, as they alone are not able to resist to the massed external shocks.
In this regard, it is appropriate to the level of heads of 20 leading nations of the world to implement a number of practical measures:
- to create the supranational body of the international adjusting of processes of liberalization and internationalization of the national banking systems and providing of financial help to the national economies for softening of negative consequences of world financial and economic crisis;
- to work out the mechanisms of international control after motion of foreign capitals, providing transparency of the banking systems of all countries, that means the necessity of native reformation of all international currency-financial system;
- to work out the mechanisms of international control after motion of foreign capitals, providing transparency of the banking systems of all countries, that means the necessity of native reformation of all international currency-financial system;
- on the transitional stage to assume possibility of forming of new world and regional financial and economic centers with the use of multicurrency standard;
- to consider possibility of development in the prospect of supranational currency for providing of monetary-economic safety in the world.
It is impossible to ignore circumstance that today in the world really the monetary items of three largest countries prevail: the USA(dollar), European Union(euro) and China(yuan).
There are now also expanding the scope of international trade in yuan, bypassing the U.S. dollar. In particular, South Korea, Indonesia, Malaysia, Thailand, Argentina, Belarus, Russia, Kazakhstan, truck the currencies for a yuan without the dollar converting.
In addition, every day at the internal monetary market of China of $400 million interchange on yuan [12, c.2]. Therefore reformation of the world currency system can not take place without active voice of China, as a yuan applies on the role of regional key currency. In a prospect on the role of regional key currency the Russian rouble applies within the framework of CIS countries.
Appearance in the triad of the Chinese yuan is perceived as a paradox: the economy of country did not yet get status market, a yuan is not freely convertible currency, it is not present in the basket of currencies of SDR, a country does not adhere to principles of IMF, the structure of gold-value backlogs and monetary policy of country do not adhere to principles of transparency. The indicated lacks of this block are compensated by the Japanese yen answering all international standards [13].
Not all perceive the real the ascent of the Chinese yuan on the top of pyramid of the world monetary system. However with strengthening of position of China in the world economy of change in a triad will appear inevitable. Asian block in composition yuan - a yen will be rolled on the top of triangle, displacing an euroblock downward. The basic premise of these changes: the growth rate of GDP of China in crisis in 2008 amounted to 8% in sub-zero values of this index in almost all countries, 10.4% - in 2010, 9.2% - in 2011, the IMF forecasts for 2012 and 2013, the highest in China from all over the world, respectively: 8.2% and 8.8% [14].
It should be noted that Russian Federation accepts the most direct and active participating in development of concrete suggestions for "Group 20" on providing of stable world economy and prevention of crises of similar scale in the future. In their number: development and acceptance of the internationally confessed standards in the spheres of macroeconomic and budgetary policy, an observance of that would be obligatory for leading world economies, including countries-issuers of key currencies; stimulation of internal demand is in national economies, thus in accordance with the tasks of providing of Medium to Long Term macroeconomic stability, development and acceptance of international agreement determining the global standards of adjusting and supervision in a financial sector; revision of role and mandate of IMF in accordance with the new structure of the world currency-financial system, and also increase of resources and development of new credit mechanisms IMF.