Bretton Woods System

Bretton Woods System of Monetary Management established the rules for financial and monetary relations among the world's major industrial states in mid 20th Century. It was the first fully negotiated plan of its kind so as to govern and emphasize the monetary stimulus of the global economy. The International Monetary Fund(IMF) was established by the planners of the Bretton Woods so as to regulate international monetary activities.

The basic feature of this Management System was an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a predefined fixed value with minor deviations. Considering US Dollar as the major Currency of exchange, the allied countries had to exchange the funds through US Dollar so as to maintain currency approximation.

The basic aim of Bretton Woods was to disburse power and influence among the countries and to bring out countries ready to lead the global economy after Great Depression and World War 2. In initial times the favored mechanism was to impart Capitalism. For a pur Capitalistic Economy intervention of public sector was very important. In initial cases France demanded for state intervention leading to a lesser Capitalistic environment.

All the participating governments at Bretton Woods agreed that the monetary chaos of the interwar period had yielded several valuable lessons.

So as to keep the global economy away from the chaos it has just emerged from. So as to implement this strategy many of the most vital trading options were to be sacrificed. Trade in the 1930s became largely restricted to currency blocs. These blocs retarded the international flow of capital and foreign investment opportunities. Although this strategy tended to increase government revenues in the short run, it dramatically worsened the situation in the medium and longer run.

Seeing and experiencing the above impact, countries started to consider the importance of Government Intervention in Economic matters.

The various activities included in the Charter of Bretton Woods System are:

1. To understand and simplify Fixed Rate Changes.
2. To understand the complexity of Trade.
3. To design a Charter for effecient working of International Monetary Fund.
4. To plan Financing of Trade Deficits.
5. Reconstruction and Development of Developing Nations.

Bretton Woods was a very important part in restructuring of Financial and Economic global system. But it had an implication which led to high imbalance in Balance Of Payments. Also the Dollar to Gold ratio started to weakening when France demanded Gold supervised by US. There were many other factors and many more implications.

So as to mitigate the above condition's impact a parallel monetary system was implemented for all Traded Funds by International Monetary Fund(IMF). The system till now is implemented and various consequences have been handled successfully with an active cooperation and assistance with leading NGOs.

G7 and G20 countries

G7 Countries

The G7 was an informal gathering of heads of state and governments of the world's most advanced economies (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States).

In the early stages, members of the G7 were accompanied at meetings by their foreign and finance ministers. In 1998, the British Presidency decided to separate the ministerial meetings from the original summit in order to keep the original concept of a small, informal gathering. In the same year, Russia joined what then became the G8. Since 2005, the G8 has been holding dialogues with the major emerging economies of Brazil, China, India, Mexico and South Africa.

G8 finance ministers meet once a year before the actual summit. However, finance ministers also meet in general three more times (early in the year, and at the margin of the spring and annual meetings of the international financial institutions), but in a G7 (instead of a G8) framework. . Since the introduction of the euro, the European Central Bank (ECB) and the President of the Eurogroup also attend. (Courtesy:Wikipedia)

The G7/8 deals with such issues as: global economic outlook and macroeconomic management, international trade, energy, climate change, and relations with developing countries.

G20 Countries

The G20 (Group of 20) is a group representing 19 of the world's largest economies plus the European Union that are strategically important and influential in the world economy. The G20 was formed as a new forum for cooperation and consultation on matters pertaining to the International Financial System (IFS).

The membership of the G20 comprises the finance ministers and central bank governors of the G7, 12 other key countries, and the European Union Presidency (if not a G7 member); the European Central Bank; the Managing Director of the International Monetary Fund; the Chairman of the IMFC; the President of the World Bank; and the Chairman of the Development Committee.

The G20 is an informal forum that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability.

The members of the G20 are the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States of America. The European Union is also a member, represented by the rotating Council Presidency and the European Central Bank.