For an intergovernmental organization with 187 member
nations, you would figure most of us would have a better understanding
of the function and purpose of the International Monetary Fund (IMF).
Don't worry though. Throughout long periods of its
history, the IMF itself hasn't had a great grasp on what it does or
how it does it! It's had more identity crises than Madonna, and at
times has been just as difficult to keep up on.
To explain the IMF's exact mechanics would require a
semi-involved discussion of "central banks" – in the US, its that
thing everyone keeps calling "The Fed." That topic alone could take
up an entire blog post (or dozen) so in the interest of getting an
answer out to Evan, let me cut right to the chase:
The IMF is an independent entity, tasked with the
responsibility of "promoting monetary cooperation" between its member
nations (read: its the world's money changer). The end goal of the
IMF is to keep the global economy stable, and it does this through
facilitating exchange rates, balance of payment assistance,
consultancy, loans…whatever they figure needs to be done.
All this, by the way, is a pretty important task right
now, given the vast interconnectivity of economies we see today and
the ever present threat of the big bad "chain reaction."
You probably noticed how this is an extremely broad
and ambitious goal. When the IMF started out in 1944, it had less
than 30 members, who were concerned mostly with only one issue: taming
fluctuations in exchange rates.
However, ever since we all dropped off the gold
standard and adopted floating exchange rates, that issue (for the most
part) just resolves itself. But the IMF has stuck around.
In recent history the IMF's major role has been making
short-term, only-when-needed loans to member nations' central banks,
for the purpose of "price stabilization." This is just a fancy phrase
for curtailing inflation or deflation of the world's currencies...
Continue reading at: http://economystified.blogspot.com/2011/04/th-imf-and-world-bank.html
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