The theory of Financial Repression and its Application in Economies of Essay

The theory of Financial Repression and its Application in Economies of Different Countries - Essay Example This essay describes the concept of financial repression, and illustrate the mechanism of its action, using the cases of different countries. The studies conducted by experts confirm that the restrictions imposed on the financial sectors of these two countries have indeed negatively impact on their respective economies giving credence to the McKinnon-Shaw hypothesis. Financial repression must have been fundamentally influenced by Keynesian economics as well as provoked by the instability of the early 20th century events. Financial repression is underpinned by the theory that the state should intervene in financial matters to ensure lesser demand for money that should be channeled instead to the capital/labour sector. It was McKinnon and Shaw, who called attention of the world to the negative effects of such practices. Their hypothesis recommended the liberalisation of the financial sectors from such restrictions to stop stagnation and initiate economic growth. They asserted that financial repression causes economic stagnation and that countries must therefore liberalise their financial sectors. This assertion is confirmed by other studies and models as well. Nonetheless, a number of cases exists that point to a contrary finding such as the cases of Korea and Malaysia that were both placed under financial repression in the 1980s to avert financial collapse. This paper presented the cases of India and China, both of which are considered emerging global super economies, where the provisions of the theory proved to be accurate. ... The existence of financial repression can be deduced from the presence of the following factors: unsystematic distortions in financial prices such as interest and exchange rates; interest rates with ceiling caps and nominal interest at fixed rates, which lead to low or even negative real interest rates; high reserve ratios; guided credit programmes, and; ineffective credit rationing (Bhole 16). Gupta (2004), however, narrowed down the elements of financial repression into interest rate ceilings, high reserve requirements and compulsory credit allocation. The consequences of these intermediary measures are: the implementation of high reserve and liquidity ratio for the purpose of easing budget deficits forcing banks to hold government bonds and money; private bond and equity markets remain undeveloped because of the difficulty of getting government money from private securities, and; government measures adopted to discourage private financial entities from competing with the public se ctor and to spur low-cost investment characterise the banking sector with interest rate caps (2). Financial repression is an economic tool usually employed by developing countries and was popular before the last quarter of the 20th century. It was said to be a knee-jerk reaction to the events of the first half of that century. History shows that the first half of the 20th century was blighted by two financial catastrophic events: the Wall Street Crash in 1929, and; the Great Depression, which was instigated by the Crash. These two events were themselves thought to be two of the underpinning reasons for the outbreak of WWII. The lesson that these events brought was that command economies were more stable and that the state can take the

1964 Tokyo Olympics Essay Example | Topics and Well Written Essays - 500 words

1964 Tokyo Olympics - Essay Example Symbolizing a reacceptance to the global community and the end of a lengthy, depressing period for many Japanese, the 1964 Tokyo Summer Olympics was a moment to recognize and commemorate the progress and reemergence of Japan. This Japan was new and different from what it used to be in the eyes of the world; it was no longer a wartime foe, but a peaceful country that terrorized no one. In a surprisingly short time, the transition from distraught enemy to rebuilt friend was achieved in less than 2 decades. Japan had previously joined the United Nations and several other international organizations, but nothing matches the vision and splendor of an Olympics. The whole world would be coming to Japan, and those that could not come would be watching live and in color for the first time. It was also the first Olympiad to be hosted in a non-white, non-Western country, a point of pride for both Japan and the International Olympic Committee (IOC). The Japanese also made a decision to prove the world that they had restructured and were now a peace-loving people. The Olympics, which claim to be apolitical and about individuals coming together in nonviolent competition, were perfect for displaying this new identity based on Japan's constitution that renounced war as a tool of the state and its status as the only country to suffer from an atomic bombing. Certainly, selective amnesia was necessary that either forgot the war or centered on domestic torment during the war rather than the suffering Japanese caused across Asia and the Pacific during the 17 years of war. This was most obviously witnessed at the various art and cultural exhibits that cautiously eliminated all images and arts related to the Empire. As the Japanese government was basically prohibited the use of the military or its traditions, the Olympics were also a harmless way to promote patriotism and nationalism.