ABSTRACT
In the United States, the stock market break brought the introduction of New Deal banking legislation that determined the activities permitted to financial institutions with directed prices and quantity constraints on markets. A much more important source of volatility comes from instability in domestic financial markets being transmitted internationally by international capital flows and the operation of international banks across borders. Building on Hyman Minsky's approach, stability can be increased by measures that ensure that firms maintain hedge financing profiles defined as financial management that insures that exogenous changes in cash commitments are matched by changes in cash inflows to meet them. Bretton Woods was a system organized for a world dominated by trade amongst more or less similar countries with individual countries occasionally falling into speculative mode due to an unforeseen internal or external shock, which could be countered or offset by changes in internal policies.
