International Monetary Fund (IMF) (2)

The Bretton Woods system had been based on the US Dollar as the key currency, and on the member nations' GOLD RESERVES, the most important being the US gold reserves kept at FORT KNOX. In the early 1970es the US lifted the policy of backing the Dollar with gold reserves.
The OIL CRISIS contributed to a change in international finances, as the oil-producing countries now attracted a cash flow, while especially those third world countries without oil reserves found it extremely difficult to pay their bills. INFLATION became a problem much larger than before, especially in a number of South American countries, mismanaged by dictatorial juntas, where annual inflation figures could reach 4 digits. Inflation also became a problem in advanced industrial nations such as the USA and the FRG; in the latter, anti-inflation policy took first priority (the country had experienced hyperinflation twice that century). Exchange rates underwent considerable changes; hard currencies such as the DM and the Swiss Franc rose in value. Softer currencies, such as Italy's Lira, lost in value. Many third world currencies had lost so much in value that they were not accepted in international trade, as were the currencies of the socialist camp, where the exchange rate was fixed by the state.

The IMF now found itself with a new task : come to the rescue if a country's economy was in a severe crisis, indicated by a drastic decline in the value of its currency. The IMF would use such opportunities to require a number of political reforms, with the aim to liberalize the market, to reduce protectionist measures, to combat corruption and to place the respective national bank under a professional leadership.
This field, the IMF coming in in order to prevent an economic collapse, has become increasingly important in the 1990es when investors such as GEORGE M. SOROS began to speculate on currencies, beginning with the Pound Sterling. Best known is the ASIAN CURRENCY CRISIS of 1997/1998, which hit Indonesia, Malausia, Thailand and South Korea. While the IMF helped in stopping the collapse of faith in these nation'as currencies, the IMF has been widely criticized for enforcing a policy which causes to a decrease in the standard of living and in rising unemployment.

World Bank Historical Chtonology, from World Bank Group Archive

This page is part of World History at KMLA
First posted on July 22nd 2001, last revised on November 15th 2004

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