According to Chancellor Helmut Schmidt the interest rates of the developed countries in the post1990 era were higher than they had ever been "at any time since Jesus Christ" (http://hdr.undp.org/external/HDR_papers/oc3b.htm). In 1983, in Latin America, whose devaluations were enormous, it was recorded that in one year "the effect on the individual private sector, which in [some] cases had been encouraged by the policies of the authorities to borrow, has been devastating...the amount needed in local currency to service external debt has increased three or four times" (Kuczynski,1983, p. 22). The situation in these countries is such: with the decrease of their currency value, more goods must be sold to pay back their debt plus interest, and since their export prices have been steadily declining in the post war years, their accumulated interest swells to a rate that is higher than the nominal dues stipulated in the original contract (http://hdr.undp.org/external/HDR_papers/oc3b.htm). In fact, their interest rates are sometimes more than three times higher than the comparative interest rates paid in the same era by developed countries (ibid). The fluctuating rise and fall of the international markets can, consequently, lead debtor countries into stagnation and inflation that last for much longer than they generally do in developed countries. That such was the case can be exemplified by the 1980s. From the viewpoint of fewer developing countries, Kahn (2009) states that the following issues need priority: (1). The implementation of decisions to ensure that world liquidity does not originate from the payment deficits of a few countries, but that...
More flexible conditions in the policies of the IMF so that developing countries can be given the chance to develop their trade and employment and efforts in constructing their country, (3) mechanisms should be explored that could result in a fair sharing of the burdened of adjustment especially in very wealthy countries; this would also diminish inflationary pressures, (4) improvement in compensatory financing institutions, (5) greater sympathy to the problems of these developing countries and greater empathy regarding their challenge in meeting repayment of debts, (6) creating new policies specially for these countries in order to assist them with financial aid and, (7) assisting developing counties with meeting the present policies of the IMF by extending policy advise, financial support and technological assistance so that their transition to the level of developed countries in regards to the international monetary policies is facilitated (Kahn, 2009).
International Monetary System In world trade, varied national currencies are swapped for each other by means of rules and procedures set by a system called the international monetary system. To delineate a general standard of value for the world's currencies, such a system is believed to be necessary. The global monetary structure has always adhered to the organizational framework of the international discipline. In each stage of the financial capitalism there exists
Bretton Woods International Monetary System was invented and put in use from the end of World War II until the mid 1970s. In theory the system was designed to make banking more global and more streamlined. In fact, according to historians, "the Bretton Woods system was history's first example of a fully negotiated monetary order intended to govern currency relations among sovereign states. In principle, the regime was designed to
These critics argue that the United States and Europe have been the principal financial support for the IMF for over fifty years and that, but for, such support the IMF would long ago ceased to function as a viable organization. Those supporting this view, however, also argue that the IMF has lost sight of its original goal and ventured into new areas that might be best left for others
International Monetary Fund (IMF) serves as an important function that makes international trade less challenging. The IMF is a powerful international institution that works together with the World Bank to provide support and guidance to nations in all stages of economic progress. The IMF is responsible for managing the global financial system and supplying loans to its member states to help alleviate financial problems. Agreement for its creation came at the
Foreign Monetary System A monetary system is any structure initiated by the government and mandated to issue currency, acknowledged as the medium of exchange by its citizens and governments of other nations. The central bank manages the monetary system of a country; this same bank has the responsibility of printing money and controlling the economy. Since the colonial period, coins from the European colonies had circulated in all the colonies. The
The IMF currency reserve units are called Special Drawing Rights (SDRs); from 1974 to 1980 the value of SDRs was based on the currencies of 16 leading trading nations. Since 1980 it has been reevaluated every five years and based on the relative international economic importance of the British pound sterling, the European Union euro (formerly the French franc and German mark), the Japanese yen, and the U.S. Dollar."
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now