Mortgage, Investments, Monetary Systems in History

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Table of Contents

Introduction
Globalization and global monetary systems
Real estate investment and history of money
Government bonds issuing and history of money
Conclusion

Introduction

Money is one of the aspects to have constant dynamism in all parts of the world. The value and the perspective people have for money have been informed by historical events and major monetary themes globally. Some of the significant themes in the money history include mortgaging, investments in stock markets and government bonds, and the different monetary systems in the different countries of the world. This essay covers three themes or events in the history of money.

Globalization and global monetary systems

The best monetary systems and financial supremacy have been a reserve for the Western world for the better part of world history, with the developing countries exhibiting dependence. The economic systems in western countries have a rich history of development mainly because of the qualitative approaches they have on financial matters.

However, the Eastern world economy and financial systems have posed a challenge to this state of affairs especially in the recent past. For instance, China has shown drastic economic growth with improving industries and its penetration in the world market, especially in Africa. China has also displayed a threat by its ability to lend to some of the world superpowers like the US. While the US has deficits in its budget, China has surpluses.

The economic history and monetary themes have had twists and turn with the Western world, in most instances, having an upper hand. For instance, China initially had a strong economy that relied on the wealthy agricultural industry but declined drastically owing to the industrial revolution in the western countries between 1700 AD and 1950 AD.

In the 1830s the opium trade added a new twist in China’s economy with the British expanding their influence in Chinas’ economical territory. There was a creation of investment opportunities that culminated in the glory days of Victoria globalization. This went on until World War I 1914 that was characterized by global economic damages and the consequent realignment.

After World War II, countries revised their approaches to financial and economical matters. There were restrictions that made globalization and international trade difficult. The British established the Breton Woods system that was extremely strict on international trading practices. In addition to this, the review of fixed exchange rates curtailed the first globalization wave.

On the other hand, World War II had a major contribution to world economies with the emergence of hedge funds. Further, it pioneered the technique of borrowing from investment banks.

The globalization wave was revived in the early 1970s with the revision of economic and trading policies that allowed nongovernmental capital exports. The earlier operational gold standard was suspended and subsequently capital export endorsed. The milestone of this wave came with the free currency trade establishment.

During the second wave of globalization, America and other western countries dominated economic activities and financial policy formulation. The establishment of the International Monetary Fund and the World Bank, tools that made the developing world dependent even more, further facilitated western imperialism in the economy.

Devaluation of currencies, for instance, occurrences of incidences like Black Wednesday of September 1992, has brought drastic negative changes in the western economies. Unpredictable fluctuations in the financial world have led economic losses to the western countries and subsequently realigning the western supremacy in the global economy.

However, China’s losses emanating from the global crisis are not severe relative to consequences noted in western countries. These minimal losses have been attributed to economic reforms China has made in the recent past, and the stability of its currency.

Therefore, it is evident that the rising eastern economies pose a threat to the dominance that the USA and the Western world have in global economic influence and the globalization process.

Real estate investment and history of money

The idea and need for acquiring and owning land and houses have revolutionized the financial industries in the world. With the popular thought that investments made on houses and land are safe and the subsequent credit access for the land and house owners, more money has been put into these sectors in major parts of the world.

For example, monopoly, a “game” that originated from America led people to buy houses to the extent of owning entire streets. This was done so that those who owned more houses and land could have great influences and control of the economy through more earnings. The game was successful in many European countries and in Australia.

The mortgage industry has made tremendous growth in most parts of the world, especially in the US. As previously, ownership of houses and land enhances credit accessibility to property owners. Banks are willing to give credit to house owners since, in case of failure to pay, recovery of funds is easily done through confiscation.

Throughout history, changes in the perspective of houses and land ownership have been evident. At one time in America, ownership of land and houses was a reserve of few people. When the American economy was going through the Great Depression, people valued a well-paying job more than owning a house. The inability to own a house or afford mortgage resulted in many workers becoming tenants.

The then US president, Roosevelt put drastic economic reforms into place, which included enacting policies that made it possible for workers to afford mortgages. Low interests and low terms on loans further enhanced this. As a result, the number of people owning houses increased drastically to 60% of the population having a house.

However, the idea of making investments safer by investing in real estate has been tested and found to be a fallacy. Cases of fraud and scandals have marred savings and loan businesses in most countries throughout the world. The state insurance in the business in America has facilitated reckless investments and consequently, a lot of money is wasted. The cost of saving in America has brought a financial crisis that is the most expensive since the Great Depression. The sub-prime loans, where even people with unstable jobs could access mortgages, which George Bush introduced, made the situation even worse culminating in the 2008 financial crisis.

Therefore, it is of paramount importance to note that investing in a diversified portfolio of assets is better in relation to paying a lot of attention to real estate investment. By doing this, investors will manage to make sustainable investments with a proper check on debt accumulation and associated costs.

Government bonds issuing and history of money

Many governments in the world issue bonds to their citizens to fund their projects. The dynamism associated with bond issuing is one of the monetary issues to have revolutionized the history of money. The sale of government bonds is a crucial tool that even a government can use to measure monetary and fiscal policies. Changes in values of governments’ bonds in stock markets have great implications on interest rates, which consequently affect economies.

Governments have in the past used bonds to finance their deficits. For instance, Italy has used bonds to fund the war that would have otherwise paralyzed its economy. The magnitudes of bonds vary from country to country depending on the countries’ varied GDP and the countries’ monetary and fiscal policies.

Japan is an example of countries that use bonds to get funds to support their projects. It has an elaborate method of issuing bonds and the subsequent debt management program. Japan has accumulated debt, from the sale of bonds, valuing 838 trillion Yen since 1980. The government pays the debt with a 15% interest annually.

Though the use of bonds is a popular method of governments getting funds, the method is prone to overuse. For instance, between 1783 AD and 1815 AD, the British government sold too many bonds to fund war resulting in increased debt. For customers, the buying of bonds especially during crisis and in times of wars was quite a risky affair. However, many people have gotten wealthy by investing in government bonds.

The trade on government bonds has been made risky by the negative bond yields that have been seen in some countries mostly in Europe. This means that investors have to be extra careful and make in-depth market analyses before they purchase government bonds.

Conclusion

It is evident that the history and ascent of money are influenced by some aspects such as government selling bonds as a way of getting resources to fund their projects, globalization and financial policies, and real estate investment.

However, there are changes in the views and perspectives pertaining to each of these monetary themes. To start with, it is evident that the economic dominance that the West has been enjoying is threatened by the rising East world. Secondly, investing in real estate is not as safe as it is commonly believed. It is faced with fraud and associated high cost of loans. Investors should, therefore, make diverse investments. Lastly, the aspect of government bonds should be carried out with deliberate caution. Governments should regulate sales of their bonds while the public should make wise decisions in determining the time to buy the bonds.

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