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International Montary Fund

 

            
             The International Monetary Fund's record is one that can be debated. Its success record is one that has not been proven.
             The international financial system has changed dramatically since its inception. Its original purpose was to maintain the stability of the world monetary system. It was created to encourage worldwide economic growth and help prevent wide currency fluctuations. The Fund sets currency values relative to gold in a manner that allowed for an adjustment. After 1971, when the world allowed currencies to be measured against other currencies, the IMF no longer had to maintain currency value in relation to gold. The main reason the IMF was created had now vanished.
             The speed and growth of private currency transactions marginalized the effectiveness of the IMF. Private currency transactions have grown since World War II. Most currency transactions occur outside the influence of the IMF. The Fund, which has funds at its disposal, doesn't have all of its reserve available for financial transactions. It's ability to influence exchange rate stability is negligible when compared to the amount of financial transactions taking place throughout the world market. IMF resources can not compare with those funds of the private sector. The IMF lacks the ability to rapidly respond in order to affect exchange rate fluctuations. The world currency values adjust on a minute-by-minute basis; the IMF's response time is days, weeks, or even months. Usually, by the time the IMF reacts, a country will have suffered the consequences of its currency's collapse.
             Private direct foreign investment eliminate the need for the IMF. When the IMF was created, not much private investment flowed to the developing world. The IMF could change this by investing in less developed more and more investors are eager to enter less developing nations. The IMF is in direct competition for these investment opportunities.


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