What Are The Problems Of Present International Monetary System? Give Suggestions To Improve The System.

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What Are The Problems Of the Present International Monetary System? Give Suggestions To Improve The System.

What is the International Monetary System?

What Are The Problems Of the Present International Monetary System? Give Suggestions To Improve The System.

The present international monetary system, also known as the Bretton Woods system, has several problems, including:

Exchange rate instability: One of the main problems of the present international monetary system is the instability of exchange rates. Exchange rates are subject to fluctuations due to changes in economic conditions and government policies, which can lead to uncertainty and instability in international trade and investment.

Currency imbalances: The present international monetary system also leads to currency imbalances, as some countries, such as the United States, tend to run large trade deficits, while others, such as China, tend to run large trade surpluses. These imbalances can lead to economic and political tensions.

Lack of a global lender of last resort: The present international monetary system does not have a global lender of last resort, such as a central bank, to provide emergency financing to countries experiencing financial crises. This can lead to financial contagion, as a crisis in one country can spread to other countries.

Limited role of IMF: The International Monetary Fund (IMF) plays a limited role in the present international monetary system, and its influence is often constrained by the interests of powerful member countries.

Inadequate representation of developing countries: Developing countries are often under-represented in international monetary institutions, such as the IMF and the World Bank, and their voices are not adequately heard in the decision-making process.

To improve the international monetary system, several suggestions can be made:

Establish a global lender of last resort: A global lender of last resort, such as a central bank, should be established to provide emergency financing to countries experiencing financial crises. This would help to stabilize the international monetary system and prevent financial contagion.

Increase the role of the IMF: The role of the IMF in the international monetary system should be increased, and its resources should be strengthened. The IMF should be given more power to provide emergency financing and to supervise the international monetary system, as well as a better representation for the Developing countries

Implement a global monetary system: A global monetary system, in which a single global currency is used for international transactions, would help to stabilize exchange rates and reduce currency imbalances.

Establish a system of international financial regulation: An international financial regulatory system should be established to supervise and regulate the activities of international financial institutions and to ensure that they operate in the best interest of all member countries.

Increase representation of developing countries: The representation of developing countries in international monetary institutions, such as the IMF and the World Bank, should be increased, to ensure that their voices are heard in the decision-making process.

Encourage the use of alternate currency: Encourage the use of alternative currencies, like special drawing rights (SDRs) issued by the IMF, as a means of international payments. SDRs can reduce the dependence on individual currencies and promote greater stability in the international monetary system.

Promote greater transparency and accountability: Promote greater transparency and accountability in the international monetary system, in order to increase the public’s understanding of its workings and build public trust.

In conclusion, the present international monetary system has several problems, including exchange rate instability, currency imbalances, and a lack of a global lender of last resort. To improve the system, it’s important to establish a global lender of last resort, increase the role of the IMF, establish a system of international financial regulation, increase the representation of developing countries, encourage the use of alternative currencies, and promote greater transparency and accountability.

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