International Financial Markets (1970s-1990s)

The Rise of International Financial Markets (1970s-1990s)

• Series of events reshaped the global financial landscape.

Regulatory Context

• The Bretton Woods System collapsed, leading to flexible exchange rates and less strict capital flow regulations.
• Domestic financing systems were deregulated during the 1980s and 1990s.
• Institutional investors like insurers, pension funds, and investment funds managed an increasing share of domestic savings.

Economic Climate

• Current account imbalances grew, increasing international capital flows.
• The United States and continental Europe had deficits, while Japan and Germany had surpluses.
• Developing economies showed different patterns of specialization and growth relative to advanced economies.

Technological Advancements

• Information and communication technologies (ICT) transformed financial transactions.
• Financial innovations led to new financial products and practices.
• Increase in trading stocks and bonds

Henri Bourguinat's 3Ds of Finance

• Deregulation: Loosening of financial activity regulations.
• Disintermediation: Shift from banks to markets.
• Dismantling of barriers: Financial sectors gained access to a broader range of activities.

Risk Aversion and Financial Crisis

• Investor risk tolerance is described as: averse to risk, risk-neutral, or risk-seeking.

Investor Type Behavior During a Financial Crisis

• Risk-averse investors buy riskier assets before a crisis, and less risky assets during a crisis.
• Risk-seeking investors buy stocks before a crisis and fewer stocks during a crisis.
• Risk-neutral investor tolerances did not change

Financial Globalization and Systemic Risk

• Financial globalization is the emergence of a global financial network operating continuously across almost all time zones.
• Microeconomic behaviors of speculative operators can amplify volatility in an unstable economic environment.
• Systemic Risk: Individual responses to perceived risks can increase overall instability.
• Speculation involves buying or selling based on the expectation of a price change rather than usage.

Globalization: Extent vs. Intensity

• Globalization refers to the multiplicity of links and interconnections between states and societies.
• Extent: The geographical spread of mechanisms operating on a global scale.
• Intensity: The deepening of interactions and interdependencies between states and societies.
• Extent grew during the 1970s, and intensity grew during the 1980s.

Euro-markets: Borrowing and Lending

• Euro-markets are segments of short-term (48 hours to 1 year) euro-currency operations, involving deposit or borrowing transactions in foreign currencies from accounts opened in a country different from the currency's origin.
• Euro-credits: Medium-term loans (1-8 years), often syndicated by a group of banks at fixed or variable rates (based on LIBOR, plus commissions and risk premiums).
• Euro-bonds: Long-term maturities.

Origins of Euro-markets

• Early 1950s USD operations in London
• 1960s: Growth of euro-markets due to restrictive financial regulations in the USA and a growing U.S. current account deficit.
• 1970s: Strong expansion of euro-markets due to surplus liquidity in European banks, exacerbated by oil shocks, search for higher returns than traditional loans, access to international financial markets by developing economies facing current account deficits, more stringent conditions on multilateral financing (IMF) versus easier access to private bank loans at historically low interest rates, and slowdown of growth in advanced economies and search for new markets.

External Financing

• Types of state external (international) financing: Public bilateral (loans between states), public multilateral (loans from international financial institutions: IMF, World Bank, etc), private capital (mainly international bank loans in the 1960s, 1970s, and 1980s).

Capital Flows

• 1960s: Mainly North-North flows (from advanced to advanced economies).
• 1970s: Rapid growth of North-South flows (from advanced to developing economies).
• Starting in 1974, private financing exceeded 50% of the total for developing economies.

Credit Rationing

• Credit rationing occurs because of information asymmetry.
• Information asymmetry occurs because on international financial markets, there are multiple participants and multiple and complex investment options.
• Asymmetry of information about the nature (current risk level) of borrowers, causing adverse selection mechanisms.
• Asymmetry of information about the behavior (risk level of the project undertaken with borrowed funds) of borrowers.

Adverse Selection

• Lending at a higher interest rate can lead to more "bad borrowers" (who will not repay).
• Bad borrowers borrow more easily at high rates due to their lower probability of repayment.
• Banks lend at relatively low rates in small quantities (credit supply increases with interest rates), and credit is rationed.

The Supply of Credit: Petrodollars

• First Oil Shock: 1973
• Second Oil Shock: 1979
• This ended a decades-long decline in oil prices, which had contributed to the rapid growth of the "30 Glorious Years."

Reasons for Rising Oil Costs

• Technical reasons (exploitation via oil platforms)
• Political reasons, especially the rise of OPEC (Organization of the Petroleum Exporting Countries, created in 1960) against the historical cartel of the 7 majors (created in 1928).

Context: Low Absorption Capacity

• Oil-exporting countries had: Small populations, relatively high income inequality, poor diversification of GDP, and small financial markets.

Consequences of Rising Costs

• Higher costs for importers (need to borrow) and increased deposits for banks receiving additional export revenues from exporting countries (need to lend).
• Structural asymmetry between oil-importing and exporting countries.

Debt and Monetary Policies

• The external debt of developing economies grew in the 1970s because of stagflation, high commodity prices, and avoidance of conditions attached to loans from International Financial Institutions.

Allocation of OPEC Trade Surpluses

• 15% lent to developing countries
• 5% lent to international organizations
• 80% placed in liquid deposits in banks in advanced economies (or directly invested in these countries)
• The banks transformed liquid deposits into loans, increasingly to developing countries.

Volcker Policy

• Restrictive monetary policy shock initiated by the U.S. Federal Reserve (FED) starting in October 1979.
• Dramatically increased short-term interest rates in the USA (nearly 20% in 1980-1981).

Consequences of Volcker Policy

• Debt service for developing economies tripled compared to 1975-1977 because debt was mainly contracted at variable rates tied to LIBOR.

The Foreign Exchange Market Post-SMI

• The end of the International Monetary System (SMI) resulted in opening of external financing to international financial markets and growing importance of transactions not driven by commercial trade.

Characteristics of Post-SMI Exchange Markets

• Significant and lasting deviations from equilibrium exchange rates.
• High volatility.
• Frequent errors in market operator expectations.
• Contributed to the debt crisis of 1982 (developing economies' debt in USD) and emerging economy crises in the late 1990s and early 2000s.

From Banking Intermediation to Direct Finance

• Intermediated Financing: Traditional bank credit, where the bank collects savings (deposits) and distributes credit.
• Direct Financing: Financing through the issuance of securities, which is closer to traditional credit.
• Bond loans ("securitized credit"): placing short-term, renewable bills with variable rates, assuring the borrower of long-term financing, often with the bank's commitment to repurchase the paper if it cannot find a buyer.

Advantages for the Bank

• Allows mobilization of significant sums.
• Complies with the principle of maturity transformation.
• The bank does not directly provide the funds.
• Progressive substitution of standard loans with bond loans for financing states.

The Brady Plan and Debt Conversion

• The Brady Plan was launched after seven years of the debt crisis (1982-1989), at which point banks were able to make provisions for doubtful debts.
• The plan also grew out of the growth of the secondary market for debt, characterized by sometimes significant discounts (up to 80%).

Pros and Cons of the Secondary Market

• Advantage: Liquidity of the sovereign debt market.
• Disadvantage: Materialization of risk (through discounts).

The Brady Plan

• Sought to pressure banks to reduce debts through market agreements by lifting contractual clauses that prohibited individual agreements between members of a syndicate of banks and the borrowing country.

The 1980s: The USA at the Heart of the International Financial System

• Debt/GDP Reduction Criterion: Interest rate on debt service > growth rate of debt stock.
• Debt/GDP Convergence Criterion: Interest rate < GDP growth rate.

Developing Economies and the Convergence Condition

• Economy broke from the convergence condition due to a "scissors effect": Volcker Policy, commodity prices, and long term interest rates.
• Volcker Policy (1974/1980 Real LIBOR = 0.2% . 1981/1990 Real LIBOR = 5.2%)
• Commodity Prices (1974/1980 = -1.5%, 1981/1990 = -5.4% per year)
• Long Term Interest Rates (Real rate of U.S. government bonds 1972-1980 = 0.5%, Real rate 1983 = 9%).
• From 1982 onwards, net capital flows to developing economies became negative (-3.1 billion USD/year in 1982, more than 20 billion/year on average between 1984 and 1988).
• The debt crisis began in August 1982 with moratoriums from Mexico and Brazil.

IMF Mission

• To give confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity; to shorten the duration and lessen the degree of disequilibrium in the international balances of payments of members.
• The primary objective of the debt management policy coordinated by the IMF from 1982 was to ensure "national and international prosperity" by lending under conditionality.

Conditionality and Structural Adjustment

• When a country borrows from the IMF, its government makes commitments regarding its economic and financial policies in arrangements known as conditionality.
• Specific mechanisms for countries eligible for concessional financing: Mid-1970s: Trust Fund, 1986: Structural Adjustment Facility (SAF), 1987: Enhanced Structural Adjustment Facility (ESAF), expanded and extended in December 1993, then converted into a permanent facility in September 1996.

Tranches

• The International Monetary Fund releases credits in tranches based on achievement criteria.

Conditionality Terminology

• Prior Actions: Initial measures described in the letter of intent on which the agreement is negotiated.
• Performance Criteria: Conditions to be met during the program to allow continued tranche disbursements (Quantitative Criteria and Structural Criteria).
• Structural Benchmarks: Generally non-quantifiable measures deemed important but cannot be defined as performance criteria.
• Consultation Clauses: For countries practicing inflation targeting, specific criteria related to meeting the target (fluctuation band).
• Program Review: Periodic control of criteria verification, resetting clauses, and potential marginal modifications to the program.

Causes of Growth in Multilateral Credits in the 1980s

• The outstanding amount of multilateral loans increased from 10 billion SDR in 1981 to about 40 billion in 1984 and 30 billion in 1996.
• Multiple causes for the rise in multilateral credits: Rationing of private credit to developing economies, condition for debt renegotiations with the Paris Club (countries) and the London Club (banks/private), search for a catalytic effect of multilateral financing, conditionality, and reduction of information asymmetry for private investors.

Commercialisation des créances privées et rachats de dettes

• There is controversy over the efficiency of debt buybacks by indebted countries (euro-credits) on secondary debt markets to reduce their debt.
• The discount on the secondary market reflects the probability of non-repayment.
• There is a risk of a debt price increase (reduction of the discount) if partial buyback of the debt occurs, improving the probability of repayment of the remaining portion.

Advantages of Debt Buybacks

• Reduced crowding out of domestic investment (debt overhang).
• Improved borrower credibility (according to empirical literature).

Debt Stock, Debt Service, and Debt Forgiveness

• A special case of debt relief is the cancellation of part of the debt when the probability of repayment of the entire outstanding amount is considered almost nil.
• The Laffer curve of debt shows a non-monotonic effect of the debt stock on debt service.

Debt Reduction

• There are non-cooperative biases in debt reduction mechanisms, where each creditor waits for others to reduce their claims, which improves the debtor's solvency and increases the debt price on the secondary market.

Institutional mechanisms to reduce the non-cooperative bias

• Mandatory representation of all creditors in negotiations within the London Club.
• Debt renegotiation at the Paris Club is obligatorily followed by a renegotiation at the London Club.
• Coordination function provided by the International Monetary Fund, making non-cooperative behaviors impossible in principle.

Financial Relationship Between States and Oil Companies

• Rédevance Royalty: Fee on extracted production
• Profit sharing of the oil company (after World War II)

Context of OPEC Creation (1960-1970)

• Decline in oil prices at the end of the 1950s
• Creation of OPEC in September 1960

Results of OPEC Creation

• Freezing of posted prices at the current price (favorable to oil supplying countries because the period of price decline lasted until 1970)
• Royalty deducted from taxable profit, not taken from the state's share as a tax credit => helped to increase revenue for oil exporting countries

Tehran and Tripoli Agreements 1970

• Context (Early 1970)- Increase in supply and decrease in demand for oil, Sharp increase in freight prices,and Divergence of prices across shipping ports
• Unilateral negotiations: Algeria, Libya
• December 1970 in Venezuela, OPEC formulated a program of common demands: Alignment of posted prices in all producing countries upwards, increase in levies from 50% to 55%, and elimination of all discounts on posted prices

Agreements Details

• Collective negotiation of producing companies with OPEC (agreement of governments)
• Tehran Agreements: Persian Gulf producers (Increase of the levy from 50% to 55% and significant increases in the posted price over time)
• Tripoli Agreements: Mediterranean producers (same type as the Tehran agreements + commitment to reinvest part of the profits)
• Other agreements: Iraq, Saudi Arabia

U.S. Policy Mix in the 1980s

• Usual Policy Mixes: Expansionary monetary/fiscal policy (low economic activity)Restrictive monetary/fiscal policy (overheating)

Context of U.S. Policy

• U.S. Inflation: 5% at the end of 1976, 15% at the beginning of 1980
• Paul Volcker's arrival at the head of the FED (August 1979 - August 1987): monetarist orientation (based on controlling the money supply)

Effects of Paul Volcker’s Arrival and Monetarist View

• Very sharp increase in interest rates in the USA
• Domestic and global recessionary effects: international transmission of the increase in interest rates via the principle of interest rate parity.

Interest Rate Parity and Exchange Rates

• According to the principle of interest rate parity (IRP), the return of one currency compared to another depends on the rate of appreciation/depreciation and the interest rate differential.

Early Volcker Policy

• Differential in returns unfavorable to European currencies, causing a massive sale of European currencies,which forced European central banks to raise their interest rates in turn.

Currency Fluctuation

• Sharp decline in inflation = increase in real interest rates) in the United States.
• Expansionary fiscal policy increased the public deficit (increased military spending, massive tax cuts, particularly for companies).

International Consequences of Floating Currencies

• Imported Inflation: Caused by the rise in import prices, accentuated for countries with weak currencies.
• Generalization of Imported Inflation: to domestic prices
• Deterioration of Price Competitiveness: in exports and widening of current account deficits.

Monetary Preferences

• Preferred monetary habitat: a preference for certain investments, such as short-term vs. long-term, bonds vs. stocks, domestic vs. international placements, etc.
• In a quiet period, investment outside the preferred habitat is made in exchange for a positive return differential.
• In a period of uncertainty, there is a major shift back to the preferred habitat despite positive differentials.

Consequences of Uncertainty

• Shift back to the preferred monetary habitat reduces international investments to the detriment, in particular, of developing economies.
• Protectionist tensions hinder the development of world trade.

The Strong Dollar

• Developing Economies: Very rapid depreciation of domestic currencies in the late 1970s - late 1980s.
• Advanced Economies: Less significant and lasting depreciation.
• Recessionary effects are mainly linked to the rise in interest rates. Long-term interest rates in advanced economies reached a maximum of about 15% in the early 1980s, then stabilized around 10%.

The Process of Globalization

• Expansion = Horizontal integration (increase in the number of integrated countries)
• Deepening = Vertical integration (increase in integration within an unchanged group)

The 3Ds of financial globalization

• Disintermediation and return to a North-North circulation of international savings.
• Deregulation of financial activity and growth of derivative financial product markets.
• Dismantling of national spaces and constraints on public policies.

Global Savings

• During the 1970s: Main source of global savings: oil-producing countries, main destination of global savings: non-oil-producing developing countries, main form of international financing: sovereign syndicated euro credits, and risk of maturity transformation
• During the 1980s: Main source of global savings: advanced economies with current account surpluses (Japan, Germany), main destination of global savings: advanced economies (particularly the USA), main form of international financing: securities (stocks, public and private bonds), liquidity of assets limiting the cost of transformation and default risks, and marginal possibility of converting credits into securities (e.g., Brady Plan).

Risk Management

• Global financial systems operate by: Offering a wide range of available assets and positioning investors on different segments based on their risk aversion.

Theoretical Foundations for Risk Diversification

• Investors should conduct fundamental analysis of all available assets in order to make predictions about their performance.
• Investors should choose a portfolio composition based on this analysis.
• Models that exclusively maximize returns never diversify portfolios, because they always invest all funds in the asset with the highest return.

Derivative Financial Products

• Allow users to cover a risk with contracts based on an underlying asset of any type, such as currencies, interest rate products, or stocks.

The Prices of Derivatives Depend On

• The price of the underlying asset, the terms of the contract, and the risk covered.

Main Types of Derivatives

• Futures: Determination of the future price of a purchase or sale.
• Options: Similar to futures, but with the possibility and not the obligation to perform the operation.
• Swaps: Exchange of debt terms.
• They can be used in speculative operations.

Hedge Funds

• Indexed management (banks and institutional investors): where the return of portfolios is linked to the return of the indices of the markets in which they are invested.
• Alternative management (hedge funds): focus on absolute performance not tied to the return of stock market indices and employs a wide variety of investment strategies, including the use of derivatives in a speculative logic.

Present Bias

• Increased deregulation has led to a stronger preference for the present in financial markets.

Traditional Operators and Pension Funds

• Seeing an increase in the power of pension funds due to the aging population.
• Consequence: Pressure on companies to generate profits and distribute them as dividends, which can affect stock prices and lead to unsustainable bubbles.
• This can lead to insufficient investment in research and long-term projects, potentially harming domestic and global growth.

Dismantling Barriers

• Involves the breakdown of traditional separations between financial activities.

Modalities of Dismantling Activities

• Internal dismantling despecialization of activities.
• Objectives: Strengthening competition between financial institutions, access to financing, and lower costs for non-financial agents.

Examples of Internal Dismantling

• In the USA, the abolition of the Glass-Steagall Act of 1933, which separated the activities of deposit banks and investment banks (end of implementation in 1999).
• In the UK, the abolition of the legal separation of the activities of jobbers and brokers (in 1986).
• In France, the creation of the MATIF (market for derivative products, especially interest rates and raw materials currently integrated into the EURONEXT group) (in 1986).

Dismantling and Constraints on Public Policies

• The dismantling of financial barriers leads to unity of time (continuous operation 24/7 in real time) and unity of place (interconnection of all marketplaces).
• Consequences: Constraints on public policies, the difficulty or impossibility of influencing opinions on financial markets, inability to effectively intervene in price formation, risk of overbidding in the implementation of public policies supposedly favorable to international investments, removal of limitations on access to domestic financial markets, and tax cuts.

First Attempts at Supranational Regulations of Globalized Finance

• The Dynamics of Exchange Markets.
• The search for coordinated public intervention methods: from the appreciation of the dollar to the Plaza and Louvre Accords.
• Context: Strong dollar appreciation following the US policy mix in the first half of the 1980s, degradation of current account balances and rising risks in advanced economies, leading to protectionist tensions.

Plaza Accord (September 1985)

• Concluded between the member economies of the G5.
• Called for a concerted intervention by central banks aimed at appreciating the currencies of the group's countries against the dollar.
• It was coupled with a commitment from the United States to reduce its budget deficit.

Louvre Accord (February 1987)

• Concluded between the member economies of the G5 + Canada
• Prioritized the reduction of current account imbalances, via the adjustment of exchange rates to their fundamental value in a cooperative framework.

The 1987 Crash

• Following the Louvre Accords, the absence of correction of the current account deficit of the United States.
• Resurgence of inflationary expectations, causing anticipation of interest rate hikes (effective in October 1987: raising of rates by the German central bank).
• October 19, 1987: Black Monday.

Management of the Crash by the US Central Bank

• Massive liquidity injection (monetary easing) under the direction of Governor Greenspan.
• Continued disinflation made possible by a set of converging factors despite the monetary easing.
• Resulting in a revival of domestic and global activity at the end of the 1980s.

Coordination of Exchange Rates and the Concept of Target Zone

• Foundations of exchange rate coordination decisions: Practical (to accompany the landing of the dollar after the very strong appreciation of the first half of the 1980s) and theoretical (decisions inspired by Williamson's theory of target zones (1984), based on taking into account the international effects of exchange rate fluctuations).
• Zone Cible (Target Zone): Fluctuation band around a fundamental equilibrium exchange rate (determined by macroeconomic fundamentals).

Theoretical Operation of Target Zones

• Objective of the target zone: fluctuations within a band (+/-10%) around the equilibrium rate.
• Fixed exchange rates: within the bands centered around the equilibrium exchange rates, price fluctuations are left to the free determination of the market.
• Inside the band: Governments intervene when domestic currency depreciates by increasing the central bank's key interest rate, and temporary suspension in case of speculative attack unrelated to fundamentals.
• Fluctuations outside the band are allowed in the short term, without raising the key interest rate. Structural evolution of the country's competitiveness compared to the rest of the world allows realignment of the equilibrium rate.

Target Zones in Practice

• System closest to that of target zones: EMS (European Monetary System).
• At the global level, international coordination of exchange policies in the second half of the 1980s deviated from the theory of target zones because two essential conditions were not met: reduction of current account imbalances and improvement of international coordination of economic policies.

The Debate Around the Tobin Tax

• Functioning of the Tobin proposal: Global tax on capital gains made on spot foreign exchange transactions.
• Objective: Discourage repeated speculative operations on foreign exchange markets, reduce the scale of speculative bubbles, volatility, and contagion risks on foreign exchange markets, and preserve the autonomy of economic policies.

The Problem of Sovereign Debt

• A recurring theme: the Paris Club, a major player in the treatment of unsustainable claims.
• Founded in 1956, it brings together the main creditors in Paris under the chairmanship of the French Treasury.

Characteristics of Agreements

• Coverage rate, Consolidation period, flow treatment, stock treatment,Cut-off date, and Repayment terms.
• From 1989, reschedulings associated with cancellations for the poorest countries

The London Club

• An arena for the coordination of private creditors.
• Created in 1970.
• As with bilateral creditors, exclusive reschedulings in the Baker period, associated with debt reductions in the Brady period.
• In 1989, the creditors of the London Club hold only 14% of the external debt of the area, but debtors need short-term trade credits to finance their foreign trade, and therefore to renegotiate debts with payment arrears.

FDI

• Characteristics of disintermediated financing of developing (then emerging) economies from the early 1990s: Strong growth of private financing, stagnation of public financing, and rapid and regular growth of FDI with amounts of portfolio investments (and bank credits) much less important and cyclical.
• Better resilience of FDI recipients due to equity investments and remuneration in the form of dividends.
• Increasing interest in FDI in emerging economies: Interesting risk-return profile and relevant inclusion in an international portfolio of the MARKOWITZ type.

The IMF Intervention

• With developing economies after the 1982 crisis: a failure?
• Recourse to the IMF to access markets becomes recurrent, and the priority to sectors immediately generating export earnings leads to dependence on world prices of commodities.
• Reduction of public spending and public investment has an unfavorable effect on long-term growth, resulting in unbalanced specialization and relatively weak growth.
• Hypothesis of a search for stabilization of the international financing system through massive intervention in economies where international investors are heavily engaged.

When Financial Activities Take Precedence Over the Real Economy

• From Walrasian equilibrium to the predominance of speculative logics: Walrasian equilibrium on financial markets, representative money, intertemporal optimization of portfolio returns, symmetrical and complete information, rationality of expectations based on stable economic laws, rationality of decisions and independence of individual behaviors, and efficient markets (immediate and costless adjustment to equilibrium).
• From Walrasian equilibrium to the predominance of speculative logics: Multiple equilibria, multiplicity of behavioral patterns, multiplicity of time horizons, asymmetrical and incomplete information, bounded rationality, mimetic and self-fulfilling phenomena, and resistance to deviation from fundamental equilibrium prices.
• Anticipations: Fundamentalists (based on fundamental variables) and Chartists (based on the past evolution of asset prices).
• Time horizon: Fundamentalists (medium/long term, without taking into account daily variations) and Chartists (very short term: myopia, self-fulfilling behaviors, etc.).

Speculative Behaviors and Debt Crises of Emerging Economies

• Hypothesis: Causal relationship between the rise in power of speculative behaviors of actors in international financial markets and the recurrence of emerging market crises.

From the Mexican Crisis to Generalized Emerging Crises

• Exchange Crisis to Banking Crisis to Generalized Crisis.

Recurrent Characteristics of Emerging Crises

• Degradation of the current account balance, low level of domestic savings, appreciation of the exchange rate, structural fragilities, insufficient credibility of monetary authorities, fiscal systems insufficiently effective in tax collection, and persistence of debt-generating and/or weakening financing.
• In periods of financial tension, growing difficulty of access to globalized markets
• These structural fragilities associated with the speculative behaviors of agents explain emerging crises.

G5, G7/8, G20

• Double dimension: Ex ante (crisis prevention) and Ex post (crisis management).
• Search for consensus: Exchange of information and coordination of monetary, budgetary, and exchange policies.
• Publication of communiqués: Announcement effect likely to guide the expectations of market operators towards a rational anchoring.
• Possibility of unfavorable effects when market operators consider that the announcements do not correspond to the realizations.

In Conclusion

• In the absence of a formal international system and in the presence of persistent imbalances, the Gs recognize a collective management of global interdependencies.
• The limits are exponential growth of volumes on foreign exchange markets and difficulties inherent in cooperative games.