Money
Matters: An IMF Exhibit -- The Importance of Global Cooperation
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Debt
and Transition (1981-1989)
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Part
6 of 7
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The
Power of Private Capital
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By
the 1990s, transfers of private capital from one country to another
had reached thousands of billions of U.S. dollars each year. Largely
unregulated by governments and transmitted through cyberspace, international
capital flows sought profit wherever it could be found.
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credits |
Is
Anyone in Control?
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Although
incoming capital flows helped countries develop, the sudden reversal
of flows, or "capital flight," could cause panic and financial
crisis.
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Fearing
that control over money had been transferred from national authorities
to the private sector, many called for better monitoring of international
capital flows (by institutions like the IMF) or even restrictions
on these transfers.
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Growth
of Capital Markets
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By
the end of the decade, international
capital markets had grown to an extent unimagined in 1980:
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In the United States, transfers of stocks and bonds between domestic
and foreign residents rose from 10% of GDP in 1980 to 93% in 1990.
- Japan's
corresponding figures were 7% and 119% of GDP.
- Gross
international equity flows - $800 billion in 1986 - had by 1990
exceeded $1.44 trillion.
So
great was the growth that some feared control of the monetary system
was shifting from monetary authorities to the private sector.
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Growth
of Foreign Exchange Markets
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As
a result of the unprecedented growth of international capital markets,
foreign exchange markets (where one national currency is sold for
another) also experienced a surge in activity.
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