International Monetary Fund (IMF) Essay -- IMF Economics Economy

International Monetary Fund (IMF) The international monetary fund or IMF, basically promotes international monetary harmony to simplify the expansion of international trade. In a more detailed view, it advocates global monetary understanding, monitors the exchange rate and financial policies of member nations, and provides credit for member countries that are experiencing a temporary unbalance of payments. Contrary to popular belief, It is not a world central bank which exists to help the economic development of poor, undeveloped countries, nor does it have any authority over its member’s domestic policies and regulations. It is a mutual establishment with voluntarily membership that enables its members to benefit from consultations with each other. This provides a stable environment for exchanging payments smoothly and quickly. Thus, the IMF greatly increases international trade, which, in effect, expands the world economy. How does this system work? Established by the United Nations at a conference held in 1944 at Bretton Woods, New Hampshire, the IMF seeks monetary stability. At that time, because of all the recessions and the Great depression, people all over the world were demanding gold, instead of the national currency, beyond what national treasuries could supply. Therefore, many nations were coerced into abandoning the gold standard, which had given money a known and stable value. Now that countries could not depend on the steady value of gold, exchanging money became very difficult between the nations using gold and those that did not. These complications caused many of these nations to sell their products at a cheaper rate (way below its realistic value) just to undermine the trade of other nations selling the same products. There wasn’t a high demand for foreign currencies that weren’t backed by gold; governments weren’t willing to take the chance on foreign currency and its current rates. This global turmoil caused the UN to create the IMF to help regulate the International trade. From the headquarters in Washington D.C., membership is open to all independent countries with a current membership of 181 nations. On joining the fund, members are assigned a quota (a sort of membership fee) in special drawing rights or SDR, the fund’s unit of account whose value is based on the average value of five major currencies. Each member’s ... ...roversial debate in Congress raises the question of whether taxpayer money should go to the increasing contributions to the IMF. However, without this much needed assistance from the IMF, the Asian crisis will worsen with eventual negative consequences for the U.S. economy because these Asian countries will not be able to buy American goods or must cut prices so that American firms would find it hard to compete in international markets. Also, this financial affliction of Asian countries can harm U.S. security interests in Asia, claims Secretary of State, Madeleine Albright. Therefore, this policy of helping out member countries, especially by the United States, is greatly appreciated and needed by many unstable countries. By overseeing the international monetary system, the International Monetary Fund creates a more sturdy and prosperous world economy. The IMF assists countries with economic problems and consults its members on improving economic policies. By improving the exchange rates between nations, the IMF promotes a sturdy and healthy universal trade. Therefore, The International Monetary Fund is the necessary tool that helps the global economy continue into the future.