The world economic set up has been changing over years. The systems of trading have been experiencing radical changes due to the dynamism of the world economy. The todays’ currency in the various countries did not just find itself there. The currency has evolved from a mere exchange of commodities for commodities to paper and coinage money and today we have representative fraction being used as a means of exchange. Services have also been exchanged over time and this has complicated trade among nations. The underlying challenge of barter trade has been the fact that sometimes there is lack of double coincidence of wants. More so commodities lack the standard measure of value and even some commodities cannot be divided in to smaller units.

The Bretton Wood system was thus formed by the member states in the early 1940s whose main objective to bring a more solid monetary and economic system. The United States had dominated the world economy due to the fact that the dollar would always be exchanged for gold. The led to an economic isolation of the rest of the world and therefore an agreement had to be struck since there was a depression in the economy. The Great Depression led to a serious flop in the stock prices in the late 1920s and was in existence up to the mid-1940s. The world started experiencing a drop in taxes, personal income as well as profits from commodities. These effects lasted until mid-1930s in some countries. (Robbins, 1934).

This depression was even experienced in Africa where the demand for agricultural and mineral products fell drastically. France, Canada, Portugal, Netherlands among others were adversely affected by the depression. In Britain unemployment rates rose too high that revenues for the government dropped a great deal and this led to countries need to form agreements which would curb the economic doom that was in place. (Schultz et al, 1999).

In 1944 the United Nations Monetary and Financial Conference was held in Bretton Woods; New Hampshire where the fouty four member states met and discussed on the formation of an agreement to regulate trade in both monetary and other economic policies. They established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD). The latter is the World Bank today meaning that there has been success over years with these agreements. There has been a lot of integration and cooperation among countries since the World War II leading to stabilization and reconstruction of the various countries affected by the Great Depression that preceded the war. The World Bank led to the rejuvenation of many countries in all the corners of the world through funding and establishment of fiscal policies to curb inflation and devaluation of currency. This also brought about free trade and convertibility of the US Dollar to gold where a fixed exchange rate was also introduced in the world economy. (Dormael, 1978).