Securities Analysis

Summary of the article

In the article, Marc Pilkington examines the aspect of the dollar-based international monetary system. The fundamental conception of a theory of money ought to be the unit of account. The procedure whereby money is generated in credit-based economies is basic and simple. Every time a bank makes a loan, there is the formation of new bank credit with new deposits, and therefore brand new money is attained. In the contemporary, owing to the advancement in information and communication technology, e-money has come about and significantly grown and developed. This encompasses making payments devoid of the inclusion of bank accounts within the transactions. This is a system that permits an individual to pay both goods and services through the transmission of a number from one computer to the next. These novel communication networks have the likelihood of creating new political groups and positioning in the worldwide scope. As a result, it is sensible to postulate that contemporary transnational communication networks, supporting the technology compelled infrastructures behind the fast-growing stream of e-payments in the international economy, could be a preface to developing a political awareness promising to the advent of a transnational unit of account. The flaws of the current international monetary and financial architecture are pointed out (Pilkington, 2017).

The article further explains flaws in the new international financial architecture and monetary architecture. In delineation, international financial architecture is the structure and group of measures that can help prevent crises and their management in a better and more assimilated international financial setting. The success of the global economy is dependent on international financial architecture. The structural shift toward an internationally assimilated and liberalized financialized capitalism flagged the way for the global crisis. It was flawed because it was centered on a weak theoretical model. This flawed architecture was exacerbated by the intricacy of new financial products above and beyond numerous financial operators (Pilkington, 2017).

On the other hand, international monetary architecture is the group of monetary agreements that permit the cohabitation of currency regions at the regional, national, and supranational regions. There are three perceptible weaknesses. First, there is a massive magnitude of macroeconomic volatility, which depicts the insufficiency of substitute mechanisms for risk mitigation. Secondly, at the core of international imbalances is the export-led model of growth that is linked to inefficacious and socially detrimental policies that were espoused after the Asian crisis (Pilkington, 2017).

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