The building blocks of the new international financial architecure

Abstract

Several financial crises composed of Banking Crises, Economic Crises, Capital Market Bubbles, and Currency Crises have managed not only to shock the International Community, but even to bring the need and emergency for them to unite, cooperate and react, towards one objective, for the benefit of everyone. Usually, the most common objective was that of maximizing the Global Financial Stability, while minimizing the possibility of potential future financial crisis. The Bretton Woods Conference was an important agenda in the financial history of the World, which was established, in times of globalization, where the economic environment changed rapidly, and allowed capital movements to become larger and at the same time less controllable. Therefore, the need for a stabilizing system becomes more and more apparent, especially when most countries wanted to return to the old financial security and stable situation of the pre-war times as immediate as possible. All this had eventually led to the system of the fixed exchange rate, the return to the gold standard took way and by which, all leading economies had to re-establish the system, according to which every nation's domestic currency, had to be backed by reserves of gold and foreign currencies, usually the major foreign currency was the dollar currency, to a certain extent. In 1971, the US President stopped the use of the gold standard and dollars were no longer backed by the gold. The US currency like any other currency was a flat currency, being backed by the faith of the Government. This process created an unstable global financial system, which was prone to any threat of a possible financial crisis. In particular, the Asian Crisis and the process of series global financial crises, combined with the failure of Globa As the World continues to become more globalized and interconnected market, we are more exposed to the systemic risk of financial instability, and this requires immediate global financial system reforming aimed with the sustainable objectivity. The objective of this dissertation is to highlight the focal elements of the main measures which are essential in the strengthening of the national economies and the international regime for the international community to come at an agreement at the international level. The purpose of this dissertation was set to meet the relevance of the current financial crisis, which has hit really hard the global economy. The dissertation will also include in chapter 1 of the introduction; the cause and objectivity for NIFA, the creation and the components of NIFA, and finally identifying the background scenario for the possible participants that could take part in this International Financial Architecture. The Chapter 2 of the dissertation would highlight the nature of the Asian Crisis and the importance of a just and sustainable financial system approach, which could be seen as the introductive part to chapter 4 and 5. Chapter 3 of the dissertation would include the methodologies area of the thesis, which is based on both qualitative and quantitative nature of the research, with the set up of different case-studies scenarios. The Analysis and Result part of the dissertation, which is chapter 4, includes the building blocks of the purely-domestic level of the NIFA. This chapter highlights the importance of the rule society and the required change in society, from rule society to the increased focus on the audit society, given that the current financial crisis could have been avoided, if better adequate corporate and government governance were in place to restrict human actions and/or inactions which could create financial instability in the national integrated economies. The construction of the NIFA entails to primarily build-up sustainable national economies, in order to implement successfully and effectively the international agenda. Therefore, the epilogue chapter, which is chapter 5, would include the combination of discussion, conclusions and as well recommendations on the building blocks of the NIFA at the international level. The final part of chapter 5 of the dissertation would include a summary in general, consisting of concluding remarks and recommendations. The summary would reveal two important outcomes that this thesis emphasis for the survival of the global financial system. This summary ends the dissertation with the importance of Public Confidence and Burden Sharing, which are essential for the global financial stability, if we want this NIFA to be timely-effective. No matter, the times and level of occurrence of the future financial crises, the NIFA must be seen as continuous process, and therefore a long-livid programme. Whoever participates in this financial architecture needs to understand and to conform with the principles of international cooperation and convergence, which could be the best ideology for the survival and success of the Bretton Woods 2 system.