March 22, 2022

Guest Lecture

International Monetary System: Fundamentals, History and Beyond

Functions of Money:

- Medium of exchange
- Store of value
- Unit of account

However, money is more complicated than that.

We could view money as a debt (IOU= I owe you).

Money is hierarchal: based on creditworthiness (counter party risk) and time (tenure)

How important is money?

Creditworthiness = how likely it is for a lender to receive the money back from the borrower (capacity of
and willingness)

Pyramid of money:

- broad money
- broader money
- narrow money
- monetary base

The risk increases with time. So short-term are preferred risk wise.

Mooney needs the law and its enforcement (debt requires governance).

Can money die?

- Yes, money can die. Example: money can die if the state dies or if there is hyperinflation. real-
word example of money dying: the Weimar economy

There is no such thing as international money.

Important events and periods:

- The Gold Standard

- WWI
- Global Monetary Disorder (Great depression, WWII)
 - Bretton Woods

Global monetary disorder (1971-1082) stagflation, stocks, USD standard

France wanted a silver standard instead of the gold standard because they had more silver available
resource wise. However, after they lost WWI to Germany, Germany wanted to have a different
standard, so they chose the gold standard.

USD weaponization, RMB, Petrodollar, Bretton Woods III

good track record for the US, so most countries trust the USD