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University of Trieste, Trieste, Italy

ABSTRACT

The Dutch, it seems, more than anyone in the West since the palmy days of ancient Rome, had more money than they knew what to do with. They discovered, unlike the Romans, that the best use of money was to make more money. They invested it, mostly in overseas ventures, utilizing the innovation of the joint-stock company in which private investors could purchase shares, the most famous being the Dutch East India Company” (Kuzminski, 2013, p. 38).

In almost all the previous 20th century’s literature, the Keynesian General Theory have been the leading issues up to the Friedman historical review of the general efforts to reconstruct the international financial and monetary stability, with the Mundell century’s synthesis (Mundell, 2000). In the new century recurring monetary policies, based on Central Banks credit or money printing, in a deflating stagnation, with monetary policy emphasis, up to the Wray MMT, with growing sectoral imbalances, both internal and external. The only game left in town, has been the relevant ascent of Central Banks, the prevailing monetary targets first and the financial instability mechanism later, then and finally, the signs of the approaching financial collapse. In the previously planned economy countries, pulled by the Chinese miracle, the capitalistic mechanism has promoted a huge economic growth and a boost from the relevant technological evolution. The instruments operating in this new era, within the European Union monetary system, have been the following, the:

Ÿ European Financial Stability Facility (EFSF),

Ÿ European Stability Mechanism (ESM),

Ÿ European Fiscal Compact (EFC),

Ÿ Emergency Liquidity Assistance (ELA),

Ÿ Long-term refinancing operation (LTRO),

Ÿ Quantitative easing operations,

Ÿ Targeted longer-term refinancing operations (TLTRO).

Under supervision of the:

Ÿ European Banking Authority (EBA),

Ÿ Single Supervisory Mechanism (SSM),

Ÿ Economic and Financial Affairs Council (ECOFIN).

Faced with all this chaos and the possibility of even worse things to come, central banks shifted from a laissez-faire mode to an interventionist “whatever it takes” (WIT) mode. It was a dramatic change. Working with their counterparts in fiscal agenciesa phenomenon that was anticipated by that dramatic joint visit by Chairman Bernanke and Secretary Paulson to the leadership on Capitol Hill, they threw everything they had, and could think of, into stabilizing an enormously dysfunctional financial system. The money-printing presses went into overdrive. A myriad of emergency funding windows were opened to enable cash to be injected into the financial system and from virtually any and all directions” (El-Erian, 2016, p. 48).

The present situation shows a clear historical synchronic trend, started with the debasement of the gold standard. Definitely, exhaustively in the great depression, unsuccessfully tempered by the New Deals efforts, not recovered by the after war quotas and national bilateral contingents, the international monetary system collapsed in the first global market. The concurrent efforts of the WTO, the IMF and the BCE, have not been able to settle the structurally imbalanced global transactions. “In retrospect, citizens finally saw Keynesianism for what it was, mere window dressing for political expedience” (Shlaes, 2019, p. 13).

KEYWORDS

central banks, monetary policy, financial instability, gold standard and exchange rates

Cite this paper

Economics World, July-Sep. 2021, Vol. 9, No. 3, 144-152 doi: 10.17265/2328-7144/2021.03.007

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