The main elements of the international monetary system are the International Monetary Fund (IMF) and the World Bank. The IMF attempts to maintain structure within the international monetary system while the World Bank promotes economic development throughout the globe. Both of these institutions are critical to the effective functioning of the international monetary system, which is predicated on the orderly fluctuation of currencies. The current era of currency trading began essentially at the end of World War II with a conference held in Bretton Woods, New Hampshire in 1944. The goal of the meeting was to determine how the international monetary system should operate following the war, and representatives of the allies were present, although the United States and the United Kingdom dominated the discussions (Klein 6A).
Those present at Bretton Woods agreed that stable exchange rates were desirable, but that there should be flexibility in order to permit adjustments since floating or fluctuating exchange rates had previously been unsatisfactory. The conferees also agreed that the government controls of trade, exchange, production and other factors which had developed during the Depression were discriminatory and inefficient, and harmful to the expansion of world trade and investment.
At the end of the Bretton Woods meeting, the International Monetary Fund (IMF) was established; its articles went into effect at the end of 1945. This agreement was the basis of international monetary system transactions until 1971, and it placed the American dollar at the center of the international monetary system. According to the agreement, the dollar was the only currency which would be directly convertible into gold, which was determined to be worth $35. Other currencies were assigned values in relationship to the dollar, with the British pound equal to $2.40, the French franc set at $0.18, and the West German mark at $0.2732. By 197...