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The international Monetary System is responsible for economic stability in the world. Some countries are more developed than others. In order to prevent discrimination of poor countries by rich countries, the IMF funds developments in the smaller countries. The IMF also regulates the exchange rates in all countries against the USD. This organization is made up of member countries from all over the world (Dormael, 1978). The International Monetary System is works to create a common reference point for all the major world currencies. In 1971, the famous Bretton Woods conference was held in America to establish a common ground for trade. Previously, huge economic imbalances had existed in the world. Some countries were more industrialized than others. Some countries also had serious unemployment rates compared to others. The conference was intended to find a common ground for trade. Just after world war two, there was need to streamline trade. A common level ground could only be realized through the use of a common currency. This common currency was also to be the reserve money. Gold was selected to act as a common currency.

The use of Gold for trade created serious imbalances. Gold was used as the standard mode of currency for a long time until 1971. The use of gold benefited some countries while discriminating some countries. Gold became scarce in most parts of the world except USSR. The USA proposed the dollar as a common currency. This has since been accepted especially after a gold-dollar conversion ratio was established. The USD has been used ever since 1971 (Dormael, 1978). The dollar is easy to use. IMF is responsible for regulating the trade in the world. Some countries need to be boosted so as to create the balance. The IMF also gives loans to countries to aid in their development. Such kind of lending is to help develop infrastructures.

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