Money makes the world go round and were it not for organizations like the International Monetary Fund, this might not be possible. The IMF is comprised of 187 countries that promote global monetary cooperation, facilitate international trade and secure the financial stability of the planet. Reduction of poverty and encouragement of sustained economic growth and high levels of employment are additional goals of this group.
As a result of the Great Depression in the 1930s, world trade declined sharply. This led the future founders of the IMF to plan an institution that oversaw the international monetary system. In short, this is a system of international payments and exchange rates that enables various countries and their citizens to purchase products and services from each other.
The goal of the new system was to keep exchange rates stable and encourage member countries to eliminate restrictions on exchange that hindered trade. In July 1944, representatives from 45 countries met in Bretton Woods, New Hampshire, and agreed on the IMF framework that would take effect after World War II. They wanted to avoid a repeat of the economic policies that resulted in the Great Depression.
IMF Articles of Agreement were signed in December 1945 and in 1947, France became the first borrower. Until 1971, exchange rates were kept to those that could only be adjusted to correct disequilibrium in the balance of payments, as agreed upon by the IMF. Since that time, members are free to select their own exchange arrangement, as long as they do not peg their currency to gold.
The IMF has performed varying roles throughout history and since the global economic crisis, it has been on the front lines. The organization was recently flooded with requests from advanced financial markets for policy and financial support. To meet this need, IMF lending capacity was increased to approximately $750 billion and lending policies were overhauled.
Tags: depression, imf