Global Financial System Lecture Notes

Flashcards based on the Global Financial System lecture notes to aid in exam preparation.

What is the Global Financial System (GFS)?

A web of interconnected monetary and financial networks that link people, places, institutions, and production systems across different geographical scales, rather than a single seamless global system.

What is meant by 'hyper-globalism' in relation to finance?

The idea that finance has become detached from geography, with capital flowing freely across borders so that location no longer matters - This concept emphasises the merging of global markets and the diminishing significance of local economies.

Why does geography still matter in finance?

Because financial activities remain geographically concentrated, regulated nationally, and vulnerable to place-specific crises.

How does Harvey (1985) describe money?

• “money is simultaneously everything and nothing, everywhere but nowhere in particular” (Harvey, 1985)

• highlighting its abstract yet powerful nature.

What are the main functions of money?

Money functions as both a medium of exchange and a store of value, enabling transactions, savings, and investment.

What is meant by the 'basic circuit of capital'?

The process where money (M) is invested to buy commodities and labour (C), producing new commodities (C') sold for increased money (M').

Why does Harvey (1982) describe money as 'the incarnation of social power'?

Money allows control over labour, resources, and investment decisions, shaping economic and political relations.

What is Fordism?

A mid-20th-century economic system based on mass production and stable employment.

What is post-Fordism?

An economic system emerging after the 1970s, characterised by flexible labour, global supply chains, service and financial industries, and knowledge-based economies.

How is the financial services industry linked to post-Fordism?

Finance becomes central to economic growth, facilitating flexible investment and service-based economies.

What does O’Brien (1992) mean by the 'end of geography' in finance?

Advances in technology and deregulation have reduced the importance of physical distance in financial transactions.

Why is the 'end of geography' idea controversial?

Because financial crises, regulation, and power remain highly place-based and unevenly distributed.

How did deregulation contribute to the rise of the GFS?

By removing capital controls and encouraging cross-border financial flows.

What was London's 'Big Bang' (1986)?

A major deregulation of the London Stock Exchange that strengthened London as a financial hub.

How did transnational corporations (TNCs) shape global finance?

By expanding financial operations across borders and integrating markets.

What are financial derivatives and why are they important?

Financial instruments whose value depends on underlying assets, allowing speculation and risk management.

What is meant by 'casino capitalism' (Strange)?

A system where markets prioritize speculation and short-term profit, increasing instability.

What is time–space compression (Harvey)?

The process where technological advances reduce the time for money and capital to move across space.

How does time–space compression support the idea of a global financial system?

It enables near-instantaneous transactions and makes distance appear less relevant.

Why is Northern Rock important for understanding the GFS?

It shows how local banks are exposed to global financial market dynamics.

What caused Northern Rock’s collapse?

Dependence on borrowing from global wholesale markets that froze during the financial crisis.

What does the Northern Rock case reveal about geography and finance?

Local institutions are embedded in global networks and vulnerable to distant shocks.

How did the GFS increase national vulnerability?

Open economies became more exposed to external shocks and financial contagion.

What was the Eurozone Crisis?

A debt crisis requiring international bailouts for countries like Greece, Ireland, and Portugal.

Why does the Eurozone Crisis challenge the idea of borderless finance?

Responses were shaped by national governments and regional power relations.

Why is there no truly global financial system?

Financial power is concentrated in specific places and shaped by national regulations.

Which cities are key command points in the global financial system?

Historically London and New York, with emerging nodes in Asia.

Why is the US dollar still dominant globally?

Due to US economic power, global trade, and financial trust.

What are public financial flows?

Government-controlled flows of money, such as welfare spending and infrastructure investment.

Why are regulatory geographies important in finance?

National laws and policies shape how and where financial activities occur.

What was the UK government bailout plan (2008)?

The government injected capital into banks to stabilize the financial system.

Why does the bailout show that finance is geographical?

National governments intervened using public funds to stabilize institutions rooted in specific places.

What is the key conclusion about the Global Financial System?

There is no single global system, but multiple interconnected financial networks.

What is the central geographical lesson of the lecture?

Money and finance flow globally but remain deeply rooted in place and politics.