Money & Banking Foreign Trade Essay Example | Topics and Well Written Essays - 4250 words

Money & Banking Foreign Trade - Essay Example Today, foreign trade accounts for a noticeable percent of GDP in all the countries except some poorly developed economies. Evidently, the highly developed banking network worldwide has notably contributed to the fast growth of international trade. The foreign trade sector relies on commercial banks for services like corporate finance, foreign branch banking, and trade finance. Although the global financial crisis 2008-09 severely affected the foreign trade sector, this sector can still grow further through strategic business alliances. Since the global economy has not yet recovered from the shock of the recent global recession, level of market uncertainty is high and this situation increases the possibility of foreign exchange rate fluctuations. Due to this financial market uncertainty, commercial banks are reluctant to finance foreign trade operations and investors hesitate to experiment their luck in an unpredictable global market environment. However there are some potential inter nal and external currency-hedging techniques to avoid foreign exchange rate risks to a great extent. This paper will discuss foreign trade with particular focus given to money and banking. History of Money and Banking The history of money can be dated back to nearly 2500 years. Coinage was first minted in seventh to sixth century BC. Historically, money was considered to be any identifiable object which had a particular value and was used for the payment for goods or services and for repayment of debts within a market environment. Historians suggest that since ancient times, people have exchanged items of value, such as livestock and cereal grain, in order to meet their needs for different goods and services. It is also identified that ancient people followed a commonly shared system of tokens with intent to make market transactions more convenient. The concept of commodity money was developed followed by barter system and gift economy. This concept assisted people overcome the limi tation of bartering and to make commodities more liquid. The period between 700 and 500 BC witnessed the emergence of standardized coinage. Paper money was first introduced in China over the 11th century. The US dollar was developed only 200 years ago. Banking history started around 2000 BC in Babylonia and Assyria. The first prototype banks of merchants during the ancient period represent the starting point in the banking history. These banks had granted grain loans to traders and farmers who carried goods between townships (The lawyers & jurists). Later in ancient Greece, lenders developed two innovative practices including accepting deposits and changing money. Northern rich cities such as Florence, Venice, and Genoa had a great influence on shaping the word banking in the modern sense. Banking activities in Florence over the 14 century were dominated by Bardi and Peruzzi families, who established branches across many other parts of Europe. Banking operations notably developed in Amsterdam and London during 16th and 17th century respectively. On the strength of advancements in telecommunication and information technology over the 20th century, banking operations have undergone dramatic changes. Since this time, banks have been significantly increasing its size and geographic coverage. The global financial crisis 2008-09 led to a series of bank failures, which in turn sparked the debate