There was much talk about abolishing the Federal Reserve system not too long ago. Let's look at the Importance of our financial system

The banking system provides for a stable medium of exchange in the form of currency, provides the safekeeping of valuables for the communities the individual banks serve, provides for the growth of commerce by lending for the purchase of assets, and other stabilizing services. A strong banking system will be necessary for less developed countries to have access to the world's capital markets, which will be needed to finance the huge infrastructural investments needed to produce the high value-added items from the industries of the next century.

Before establishing their own banking system, the developing countries can have the benefit from learning about the developed nations' bank industry development. The primary function of any financial system is to facilitate the allocation and deployment of economic resources, both across borders and across time, in a uncertain environment.

A financial system provides:

(1) for the pooling of funds to create large-scale projects or for the subdividing of shares in businesses to facilitate diversifying ownership..

(2) ways to transfer economic resources through time, across geographic regions, and among industries.

(3) ways to manage uncertainty and control risk.

(4) price information that helps coordinate decision-making in various sectors of the economy.

(5) ways to deal with the incentive problems when one party to a financial transaction has information that the other party does not, or when one party is an agent for another.

As the banking industry progressed, a Federal Reserve was established to supervise the fluctuation of currency reserves for banks and to print currency. Also, a trading place known as the New York Stock Exchange was started to allow investors to buy shares of a company and/or buy loan notes known as bonds issued by companies or the government.

When the whole banking system ran into trouble in 1933, the government created the Federal Deposit Insurance Corporation to establish guarantees of the money deposited in banks. To supervise the trading of securities and to make sure that self- regulation functioned properly, the Securities and Exchange Commission was established by the 1934 Securities Act.

With a stable banking system established, less developed countries can make efforts to enter the global economy. Entering the global economy requires a development policy that fosters an industry infrastructure that is capable of creating productivity gains at an increasing rate for a country to create global competitive advantage. A country's economic development problems have to be understood in the context of an increasingly global economy.