International Political Economics

Posted by Melda Research on February 4th, 2019

 The money market is normally a subsection of the fixed income market. In this case the reference to the fixed income related to the bonds whereby a bond is normally a unitary mode of fixed income security. The variation between the money and bond market is that the money market normally specializes in extremely short-term debt securities in the context of the debts that mature in less than one year. The money market investments are additionally known as the cash investments as a result o their short maturities. The money market entails an arena whereby financial institutions normally make available to an extensive assortment of borrowers as well as investors the chance to buy and sell various types of short-term securities. These securities are normally very liquid in addition to being low-risk debt apparatus. The maturities that normally guide the money markets normally from a single day to one year and in most cases are less than90 days (Bech, Rosvall, & Garratt, 2015).  It encompasses the repo market, the call, and notice markets as well as the market for the debt instruments. There are no physical markets but instead are informal networks of banks along with traders linked by telephone, computers as well as fax machines. The participants of the money market use to borrow as well as lend in the short term from a few days to a period of one year.

The additional attribute about money market is that the money market trade normally operates under very high denominations. As a result, individual investors are greatly limited in their attempts to access the money markets. Additionally the money market is normally a dealer market in that firms purchase and consequently sell the securities to their individual accounts, at their risk. It is dissimilar to the stock market whereby the broker receives a commission to play the role of an agent while the investor takes the risk of holding the stock (Peirce & Greene, 2014).

The easiest mode of gaining access to the money market is via the use of a money market shared fund or a money market bank account. These accounts, as well as funds normally, pool assets together from thousands of investors with the objective of buying the money market securities on their behalf. However, certain money market instruments as the Treasury bill could be purchased directly. The trading via the money markets is normally over the counter in wholesale. The various instruments used in the operations of the money markets include the treasury bills, bankers’ acceptance, commercial paper, certificates of deposits, deposits as well as repurchase agreements. The additional instruments in the money markets include the short-lived mortgage, the federal funds as well as the asset-backed securities (Money, Credit, and Security Markets, 2014).

The Working of Money Markets

The money market accounts are normally a staple element for the organizations and individuals who desire the most flexibility and at the same time highest returns on their risk capital. Comprehend how the money markets work, it is imperative to acknowledge that there are of two types. The first money market is the money market account and is the most common in banks and additionally the most favored as its investment is in the low-risk assets thus maintains an FDIC protection of 0000 (Bech, Rosvall, & Garratt, 2015). The second type of money market is the money market fund is normally a structured investment fund but in most cases encompasses the riskier and higher yielding assets.

Although the two normally possess different assets, they operate in almost a similar manner. An institution or a bank that manages a money market normally takes funds and invests the most of them in the high yielding as well as short term investment vehicles such as the Treasury bonds. It could be the funds to invest in the bank as a “float” that makes it feasible for the bank to make short term and overnight loans to itself as well as to the other banks. The float in the context of the banking system is normally relatable to the automotive is to an engine.  Although the bank can manage to run without a float, the lubrication in the form of liquid cash makes it possible for it to fund diverse opportunities as well as bridge gaps for their clients. At the same time, the guaranteed payments are normally made to the bank. Thus when the clients imagine that their money is sitting in the bank vault, it is normally moving all around the bank assisting in the making improvements to the banking systems as well as operations (Peirce & Greene, 2014).

On the clients end, the money account operates like a checking account. Since people normally save money in a market account to earn higher yields on their liquid cash, the banks normally offer debit cards or check writing services to their clients. The debit card or the checking card normally faces the limitation of just a few withdrawals on a monthly basis to prevent them from turning the money market account into a model of checking account. The client’s money normally earns an interest at rates that are normally variable, implying that they have the capacity to go up or down over a certain period (Bech, Rosvall, & Garratt, 2015).

The World Trade Organization

The world trade organization was established on the 1st of January 1995 as a multinational organization with the objective of implementing the rules for trade among its member nations. At the moment, there are 145 official members of the WTO and it formation followed the suggestions of the US and other participating nations in the Uruguay round calling for its formation. The WTO operates as the chief international body tasked with multinational negotiations towards the reduction of trade barriers as well as additional measures that normally distort the competition. Additionally the WTO acts as a platform for the member nations to articulate their concerns relating to the trade policies the trading partners are using. The fundamental objective of the WTO is to liberalize the world trade, to place it on a secure basis, thus promoting the economic growth as well as the development of the member states (Jackson, 2008).

The origins of the WTO lead to the assessment of the creation of the ITO at the Bretton Woods’ conference of 1944. The operations of the WTO officially began in the year 1995 under the Marrakesh agreements that were signed by 160 nations (Connolly, 2015). The resultant outcome of the signing of this agreement was the elimination of the GATT which begun its operations in the year 1948. It is the only international body that deals with the global rules of trade between various nations. It plays the role of ensuring that trade between the member nations flows predictably, smoothly as we as freely as possible. In the year 1994, the WTO renewed and consequently adopted the GATT negotiations although it still was the new legal apparatus that is formal intergovernmental agreements occupying the status of an international entity (Winham 2008).  The WTO was intended to act as the body that administers trade agreements in addition to offering a platform that facilitates trade negotiations. The WTO additionally serves the role of settling the trade disputes that normally emanate from the members’ states in addition to reviewing the national trade policies. Additionally the WTO offers assistance to the developing nations in relation to their trade policy issues, offering technical assistance in addition to the trading programs.  The WTO has 60 agreements, decisions as well as annexes and understandings. These agreements normally make up the six chief areas that are within the scope of the WTO.  The umbrella agreement that saw the establishment the WTO exemplifies its mandates in terms of governing the trade in goods and services. Additionally it governs issues relating to the protection of intellectual property, settlement of disputes as well as carrying out reviews of trade policies. The WTO was to develop the transparency among the member states about their trade policies. Furthermore, the agreements were linked to a unitary undertaking that required the members to agree to the agreements that were the outcome of the Uruguay round (Winhan, 2008).

The WTO has not been effective in the facilitation of a balanced model of global trade. The WTO has failed its quest to protect the environment as corporations are using its influence to destroy the environment. The WTO is referring to the local environmental protections as barriers to trade thus allowing the multinationals to exploit the environment. The WTO is additionally trampling the labor as well as human rights as it has refused to institute free trade on the labor rights even though the countries that apply the labor rights are at a disadvantage. The WTO is additionally fanning the gap that exists between the rich and the poor as free trade is not effective in all countries. It follows that the developed nations are enjoying more than 82% of the expanding export trade as well as the 69% in the FDI. The developing nations, on the other hand, are hardly getting 1% of the developments (Connolly, 2015).The WTO is misusing its powers to undermine the local levels of decision making as well as the national sovereignty of the member nations. The assertion supported by the fact that the developing nations who are members are unable to make local laws for the companies until they prove to be internationally competitive.

The challenges that the WTO is facing includes the implications for the trade of the international as well as the national efforts about the reduction of the CO2 emissions. The schemes that the organization designs for the reduction of carbon dioxide emissions face difficulties in the considerations of the strategy to deal with imported products in a dissimilar national regulatory environment. The additional challenge for the WTO relates to the formation as well as a spread of the global supply chains. The change in the mode of conducting international business comes with the challenge of making distinctions between trade in goods and services, intellectual property as well as investment. The other challenge relates to the development of regulations as well as implementing these regulations. The development of the bilateral, as well as regional trade negotiations and agreements, has additionally presented another challenge as all the members belong to a minimum of one FTA.  The security of the supplies of the diverse primary commodities is the additional challenge as the WTO should develop a policy-oriented discussion on the increase utilization of export restrictions in both the agriculture and industrial sectors (Winham, 2008).

 References

Bech, Bergstrom, C. T., Rosvall, M., & Garratt, R. J. (2015). Mapping changes in the overnight money market. Physica A,42444-51. doi:10.1016/j.physa.2014.11.034

Connolly, R. (2015). Economic Modernisation in Russia: The Character of the World Trade Organization. Perspectives on European Politics & Society, 16(1), 27-44. doi:10.1080/15705854.2014.965891

Jackson, John H. (2008), 'The case of the World Trade Organization', International Affairs, Volume 84, pp. 437 – 454

Money, Credit, And Security Markets. (2014). Economic Indicators, 26-31.

Peirce, H., & Greene, R. (2014). Unlocking the Gate to Money Market Fund Reform. Pace Law Review, 34(3), 1093-1168.

Winham R. Gilbert (2008), 'Global Political Economy' in Ravenhill, John ed, The evolution of the Global Trade Regime (Oxford University Press: New York), pp. 137-171

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