One of these new changes has come about with the emergence of the global economy. With it came an influx of several new businesses that had previously operated on a localized scale. Because of the prevalence of these globalized businesses, the current economic and financial problems that are faced by economies around the world are becoming a lot easier to deal with. However, many international companies are experiencing financial problems.
In order to help these businesses deal with these problems, a lot of international and local governments have taken a great deal of control over the operations of the economy. These governments usually elect central banks that are well-experienced in dealing with various economic policies. Some of these policies include interest rates, monetary policy, fiscal policy, exchange rate policy, economic stabilization policy, etc. All of these policies are used to address the different issues associated with the economy.
There has been a major problem that has emerged as a result of the above economic policies. Namely, financial system. Since the introduction of the central banks, many banks around the world have been conducting currency operations. In addition to this, some of these banks have been doing so since the 1950s. The introduction of floating exchange rates, which was done by the Bretton Woods system, has also helped to increase competitiveness among the currencies of the world.
However, the introduction of floating trade finance, along with other types of foreign currency operations, has led to a significant decline in the level of activity in domestic commercial banking. A decline in business banking is mainly caused by a decrease in the number of bank holding companies that hold foreign assets. More importantly, there is also a decrease in the amount of commercial holdings by foreign banks. Since more banks are not conducting their own trading activities, it is not surprising to note that the number of bank employees required to operate their foreign trading activities has significantly come down.
Moreover, the implementation of fiscal policy, which is often referred to as free-trade economics, around the globe has led to a decrease in the tariffs and barriers that have been implemented. In many countries, the implementation of such policy has helped to boost the competitiveness of their domestic economy. With this, many countries are now able to gain a lot of foreign trade by offering lower prices to consumers. Many businesses are also able to compete on an equal footing with their foreign counterparts because they can easily access cheap labor.
Meanwhile, the involvement of the fiscal policy in the recovery process and stabilizing the debt crisis in many countries have helped stabilize the value of the national currency. This means that the money supply is able to increase while the exchange rate remains at reasonable levels. Meanwhile, the availability of capital continues to improve throughout the recovery process in many countries. Ultimately, this means that both businesses and consumers have more purchasing power and are able to obtain products and services at relatively better prices.
The current economic and financial problems that have been affecting the global economy can be attributed to several factors. However, experts are pointing out that the main cause lies in the excessive use of a credit-based system. A combination of factors such as excessive spending of resources, poor management of the credit, excessive imports and the inefficient use of capital goods and the introduction of fiscal policy have resulted in a country’s economy to suffer from a large scale problem.