Crisisogenicity of the Global Monetary and Financial System: Fundamental Analysis

The world monetary and financial system (WMFS) plays a key role in servicing trade and investment activities and transactions between the subjects of the global economy. In recent decades, the participants of international economic relations are facing increasing problems of access to international liquidity. The purpose of the article is to identify the fundamental reasons for the crisis of the modern WMFS. A hypothesis has been put forward regarding the differences between the US and theUK in terms of approaches to reforming the WMFS. From the standpoint of Keynesian theory, it is shown why the current institutional format of the Jamaican monetary system does not allow bringing the world economy to the trajectory of a balanced, confident and inclusive development. The factors of instability of the WMFS, which were fully manifested as a result of the introduction of restrictive measures of economic activity during the COVID-19 pandemic, are summarized. The main risks of the functioning of the WMFS associated with the significant uncertainty of the global economic recovery caused by the protracted nature of the armed conflict in Ukraine, which increased the growth of inflation and commodity prices, the disruption of global supply chains and the implementation of plans for the decarbonization of the world economy, are systematized. The transition of lea[1]ding central banks from stimulating to contractionary monetary policy could lead to a sharp decline in the value of financial assets. Taking into account the status of the US dollar as the key currency for denominating financial instruments and the system-forming role in the global trade in innovative financial products, the destabilization of the US segment of the global stock market is the second most important risk for the functioning of the WMFS in modern conditions. It is concluded that, at a fundamental level, the crisis potential of the WMFS is due, firstly, to the fragmented nature of its reform, secondly, to the conflict of interests between the goals of short-term profit and long-term stability, and thirdly, the unwillingness of the main subjects of the world economy to follow the principle of symmetry in adjusting payment imbalances.

1. Bibow J. (2019). Evolving International Monetary and Financial Architecture and the Development Challenge: A Liquidity Preference Theoretical Perspective, New York : Levy Economics Institute of Bard College. Working Paper no. 935. Available at: https://www.levyinstitute.org/pubs/wp_935.pdf, accessed 24.08.2022.

2. Cohen B.J. (2008). Global Monetary Governance, London and New York : Routledge, 335 pp.

3. Cohen B.J. (2012). The International Monetary System: Diffusion and Ambiguity. Fels E. et al. (eds.). Power in the 21st Century, Global Power Shift. Berlin Heidelberg : Springer-Verlag, pp. 195–210. DOI: 10.1007/978-3-642-25082-8_11.

4. Eichengreen B. (1998). Globalizing Capital: A History of the International Monetary System, Princeton : Princeton University Press, 240 pp.

5. Eichengreen B. (2007). Global Imbalances and the Lessons of Bretton Woods (Cairoli Lectures), Cambridge : MIT Press, 205 pp.

6. Eichengreen B. (2012). Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System, Oxford : Oxford University Press, 226 pp.

7. Farhi E., Gourinchas P.-O., Rey H. (2011). Reforming the International Monetary System. London : Centre for Economic Policy Research, 76 pp.

8. Finansy Rossii… (2022). Jeskindarov M.A., Maslennikov V.V. (eds.) Russian Finance in the Conditions of Socio-Economic Transformations, Moscow : Prometej, 710 pp. (in Russian).

9. Frenkel J. (2015). Reflections on Reform of the International Monetary System. Uzan M. (ed.). Bretton Woods: The Next 70 Years. New York : Reinventing Bretton Woods Committee, pp. 99–110. Available at: https://eml.berkeley.edu/~eichengr/Bretton-Woods-next-70.pdf, accessed 24.08.2022.

10. Greenspan A. (2015). The Map and the Territory: Risk, Human Nature, and the Future of Forecasting. Moscow : Al’pina Pablisher, 412 p. (in Russian).

11. Keynes J.M. (1980). Shaping the Postwar World: the Clearing Union. Moggridge D. (ed.) The Collected Writings of John Maynard Keynes. Vol. XXV, Activities 1940–1944. London : Royal Economic Society, pp. 42–66.

12. Krylova L.V. (2020). International Currency Competitiveness: Strengths and Weaknesses of the US Dollar. Problemy teorii i praktiki upravleniya. No. 10, pp. 24–35 (in Russian).

13. Kudryashova I.V. (2017). Chinese Yuan as a World Currency: Imperatives and Realities. Mirovaya ekonomika i mezhdunarodnye otnosheniya. Vol. 61, no. 9, pp. 36–44 (in Russian). DOI: 10.20542/0131-2227-2017-61-9-36-44.

14. Kuznetsov A.V. (2019). Problems оf Formation оf а Multipolar Financial System under the Centralization of Global Capital. Mir novoi ekonomiki. Vol. 13, no. 2, pp. 70–79 (in Russian). DOI: 10.26794/2220-6469-2019-13-2-70-79.

15. Mundell R.A. (2000). A Reconsideration of the Twentieth Century. The American Economic Review. Vol. 90, no. 3, pp. 327–340.

16. Nesterov I., Sutyrin S. (2017). Exchange Rate Regime: Perspectives of Transformation.Vorposy ekonomiki. No. 3, pp. 131–145 (in Russian).

17. Petrov M.V. (2018). The World Financial System: a Long Way to Multipolarity. Finansovaya zhizn’. No. 2, pp. 47–58 (in Russian). DOI: 10.31107/2075-1990-2018-2-47-58.

18. Reyes L. (2017). The Link between the Current International Monetary Non-System, Financialization and the Washington Consensus. Research in International Business and Finance. Vol. 42, no. 12, pp. 429– 441. DOI: 10.1016/j.ribaf.2015.11.015.

19. Smirnov D.V. (2016). Prospects for the Reform of the International Monetary System: Modern Approaches. Den’gi i kredit. No. 10, pp. 20–32 (in Russian).

20. Steil B. (2013). The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order. Princeton : Princeton University Press, 449 pp.

21. Temin P., Vines D. (2015). The Leaderless Economy. Why the World Economic System Fell Apart and How to Fix It, Moscow : Izd-vo Instituta Gajdara, 464 pp. (in Russian).

22. Wyplosz C. (2010). Is the Era of the Dollar Over. Journal of Globalization and Development. Vol. 1, no. 2, pp. 1–14. DOI: 10.2202/1948-1837.1117.