Current International Financial System

Since ancient times financial services have been a global activity.  In the last 400 years, international financial services have expanded to include insurance, lending and investment.  Towards the end of WWII, the allies realized that a new financial system would be required in the post-war period. Two of the most respected economists, White and Keynes, met together as part of a broader conference on the post-war financial system. This resulted in the creation of the World Bank and International Monetary Fund and World Bank, and recommended an International Trade Organization.  In the last two decades, the internationalization of the financial system has grown exponentially.  Since the late 1970s, many countries have floated their currency and removed their capital controls, it resulted in much more open financial sectors and allowing for massive international capital flows. The financial services industry is a global phenomenon. "Contagion-related spillovers from regional, global and national crises are the downside of financial globalization". Some Asian financial crisis countries appear to be entering a second round of banking and financial sector restructuring where further consolidation and the formation of financial holding companies will play a major role. Each country's exchange rates, interest rates and capital flows are beyond the complete control of their national government, which poses some interesting political and sovereignty issues.  "Just as no man is an island, no investor today is only a domestic investor". Countries do not have the freedom to choose whether the international financial system will affect them; they do, however, have some choices about the terms on which they participate in the global system.  There are many benefits from the globalization of the financial sector. And it will not be a system function until, and perhaps unless, the IMF has the capacity, like any national monetary authority, to initiate action on its own with its own resources as the custodian of the international monetary and financial systems.