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The Necessity of Reforming the International Monetary System

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The Financial Crisis

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Abstract

The current international financial crisis is a crisis of globalised finance, meaning that a crisis in one specific segment of the financial system — specifically the United States subprime mortgage market — eventually spreads worldwide. The effects of such a crisis are not neutral in economic and social terms, added to which the benefits of financial globalisation have come to be called seriously into question. While this crisis is associated with an absence of regulation, particularly by the State, it has been action by Big Bank and Big Government 1 that has prevented it from developing into a depression. This chapter evaluates the present international financial crisis and interpretations of it, and indicates that surmounting it will depend on a series of post Keynesian type measures. To that end, it describes very briefly the origins of the crisis, and developments and lessons from it, then presents the conventional and post Keynesian views of foreign exchange and financial crises, especially as regards the present international financial crisis. Lastly, on the one hand, it sets out the main conventional and heterodox arguments for the necessity of restructuring the international monetary system and some proposals for reform of that system and, on the other hand, in the light of post Keynesian theory, following Davidson (2002), it presents a proposal for restructuring the international financial system. That proposal, in the author’s view, is capable of preventing future foreign exchange and financial crises, while at the same time assuring the conditions for macroeconomic stability, understood as sustainable economic growth with full employment, price stabilisation and external equilibrium.

To my mother, Elza, in memoriam

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Authors
  1. Fernando Ferrari-Filho
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Editor information

Editors and Affiliations

  1. Cambridge Centre for Economics and Public Policy, Department of Land Economy, University of Cambridge, UK

    Philip Arestis (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser) (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser)

  2. Department of Applied Economics V, Universidad del País Vasco, Spain

    Philip Arestis (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser) (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser)

  3. Department of Economics, University of Utah, USA

    Philip Arestis (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser) (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser)

  4. Levy Economics Institute, New York, USA

    Philip Arestis (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser) (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser)

  5. Leeds Business School, University of Leeds, UK

    Philip Arestis (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser) (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser)

  6. Department of Finance and Management Studies, School of Oriental and African Studies (SOAS), University of London, UK

    Philip Arestis (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser) (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser)

  7. UK Government Economic Service (GES) on Professional Developments in Economics, UK

    Philip Arestis (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser) (Professor of Economics, Distinguished Adjunct Professor of Economics, Senior Scholar, Visiting Professor, Professorial Research Associate, British Hispanic Foundation ‘Queen Victoria Eugenia’ British Hispanic Chair of Doctoral Studies and Chief Academic Adviser)

  8. Brazilian School of Public and Business Administration, Getulio Vargas Foundation and CNPq Researcher, Brazil

    Rogério Sobreira (Associate Professor of Economics and Finance) (Associate Professor of Economics and Finance)

  9. University of Brasilia (UnB), Brazil

    José Luis Oreiro (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board) (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board)

  10. National Scientific Council (CNPq), Brazil

    José Luis Oreiro (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board) (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board)

  11. Brazilian Keynesian Association (AKB), Brazil

    José Luis Oreiro (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board) (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board)

  12. Brazilian Journal of Political Economy (REP), Brazil

    José Luis Oreiro (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board) (Associate Professor of Economics, Level I Researcher, Director and member of the Editorial Board)

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© 2011 Fernando Ferrari-Filho

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Ferrari-Filho, F. (2011). The Necessity of Reforming the International Monetary System. In: Arestis, P., Sobreira, R., Oreiro, J.L. (eds) The Financial Crisis. Palgrave Macmillan, London. https://doi.org/10.1057/9780230303942_10

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