Introduction to the IMF

Introduction to the IMF

Copying straight from the english Wikipedia:
"The International Monetary Fund (IMF) is the international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development.[3] It also offers highly leveraged loans, mainly to poorer countries. Its headquarters are in Washington, D.C., United States.(...) (Member) Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances."
For the full article in Wikipedia click here.

Today almost all countries in the world are members in the IMF, except a few (Cuba, N.Korea, Taiwan the most known).

In a sense, one can say that the IMF is to global economy what the United Nations is to world peace. An asterisk here: in the UN, as you probably know, there is the Security Council, a group of countries that can meet and take decisions away from the rest of the UN members. The Security Council has 15 members, 5 permanent and 10 non-permanent. The 5 permanent members are the USA, the UK, France, Russia and China. Only permanent members have the right to use a veto. On the contrary in the IMF there's only one country with the right to use a veto, the USA.

The foundation of the IMF
The great depression of the '30's, WWI and WWII caused huge problems in the global economy, even for parts of the world that were not directly affected by the actual events. This instability was no good for no one; definitely more harmful to exporting countries. That's why, since the end of  WWII, the british and american governments were looking for ways to ensure -as much as possible- global economic stability.

With the end of WWII, begins an era when governments realize that on an individual basis each one is weak and fragile. In order to have political and economic stability, countries start to form international organizations/alliances. The UN, the NATO, the Warsaw Pact, the IMF and later the EU, the BeNeLux and the Comecon are some of them.

Until that time, the wealth of each country is translated in gold reserves. This method is considered anachronistic for modern economy. With the foundation of the IMF, the US, Britain and another 27 countries as initial members of the IMF put their gold reserves together under IMF administration. These countries now replace their gold reserves with dollars (so dollar becomes a reserve currency). In return, the IMF will support the economy of a member-country. In other words, the US, through the IMF, manage to control all the gold gathered from 29 countries, gaining enormous negotiation force.

Of course, organizations or alliances like the IMF look like alliances between wolves and sheep. Weak countries apply for membership in the IMF, fearing that economic isolation should make them even more vulnerable.

What the IMF does when a member-country asks for support is to give loans with relatively low interest, but under very strict terms and conditions, eventually facilitating american or other countries' strong corporations to buy off any major public enterprise still left at a given place.