About International Monetary System

International monetary system is a set of policies, institutions, practitioners, regulation, mechanisms that determine the rate at which one currency in trade for other currencies. History of the International Monetary System Each state has its own currency, and it shows the value of the currency the goods. However, for international trade, the various currencies in the world should be changed from one currency to another currency. Changes in the monetary system caused by the economic turmoil. By studying the historical experience would be able to obtain an overview of economic instability and the emergence of international balance of payments adjustment process. International monetary and financial system plays a central role in the global political economy. Since the late 19th century, the early establishment of this system through various transformations in response to changing political and economic conditions both domestic and international level. The most dramatic change is a crisis in the international monetary integration and the international regime during the interwar years. The second transformation occurred after World War II when the Bretton Woods system was running. Because in the 1970s, a period of change under the Bretton Woods system there is a change of the gold exchange standard into U.S. dollars and a commitment to capital controls. Various changes have significant political consequences of who gets what, when, and how the global political economy. The evolution of the gold standard and the solution (1930) The concept of the gold standard is penguunaan gold currency as a medium of exchange, a unit of computation and as a means of storing hem. This activity has occurred since ancient times. But the growing phenomenon of trading volume increases with the rise of the industrial revolution encouraged a demand for tools that are easier to fund and support the international trade in order to present the gold standard set and push the government to agree to exchange their paper currency into gold with a fixed exchange rate . Since 1880 the UK, Germany, Japan and the U.S. have adopted this system of gold standard. With the enactment of the gold standard then the value of each currency in the currency of another can be easily determined so as to catalyze international trade. U.S. $ 1 initially rewarded with 23.22 grains of pure gold which 1 ounce of gold equal to 480 grains of gold. In other words the price of an ounce of gold is U.S. $ 20.67. A number of currency needed to buy an ounce of gold called the par value of gold.

The International Monetary Fund

The International Monetary Fund or the International Monetary Fund (IMF) is an international organization that is responsible in regulating the global financial system and provides loans to its member states to help balance the issues of financial balance of each country. One mission is to assist countries experiencing serious economic difficulties, and in return, the state is obliged to perform certain policies such as privatization of state owned enterprises. After a long consideration and careful, a monetary system agreed at Bretton Woods. Member countries agree to control the rate limit them in ways that have been determined. According to the initial agreement, the rates varied allowed up to one percent below or above par. When a country's exchange rate reached or approached one of the boundaries, so-called "supporters point arbitrage", the central bank intervened to prevent exchange rate market was over the limit. Inntervensi market requires a State to accumulate foreign exchange reserves, which consist of gold and foreign currencies, above the normal trading needs. An agency called the International Monetary Fund IMF, established in the Bretton Woods monetary system to oversee the newly agreed upon. There are some things that have achieved international monetary fund. For example, the agency: Managed to maintain a rapid increase of the volume of trade and investment. Show flexibility in adapting to changes in international trade. The more efficient (even a decline in the percentage of foreign reserves) The more powerful (the agency managed to get through the crisis early in 1971, addressing the speculative activity, and survive in a volatile business cycle). Support the growth of international cooperation. Build the capacity to accommodate the reform and improvement. 2.3 Determination System Currency Converter Exchange rate determination mechanism can be categorized into several groups: Free Float (Free Floating) Under this system, exchange rate allowed to float freely depending on market forces. Some factors that affect exchange rates, eg inflation, economic growth, inflation will be used by the market exchange rate in evaluating the relevant country. If the variable is changed, or appreciation of the variable is changed, foreign exchange rates will change. Free-floating system is also known as clean float.