Two supranational organizations exist for co-ordination among world's banks. The larger is the International Monetary Fund. It was created in 1945 to supervise the agreements of Bretton Woods and audits all the world's banks: its 182 member banks (the central banks of their respective countries) can turn to it for loans when things go bad. Originally it made loans for the rebuilding of postwar Europe. It has come to be known for strong-arming third world debtor countries into cutting spending on health care and education in order to repay loans and is often seen as an organization of financial enforcers. It's head office is in Washington & the US has had a highly dominant position.
The second organization for the co-ordination of the world banking system, the Bank for International Settlements in Basel, consists of central bankers from its ten founding countries, plus Swizerland. It began after the First World War to administer German reparation payments, and became a place where important questions could be addressed with the greatest discretion. No politicians, no treasury secretaries, and no heads of state are invited to join its debates. This club of central bankers, whose clients are other banks, holds its discussions in the greatest secrecy. It puts out a highly respected annual report on the state of the world's financial system.
The system in question has become increasingly unresponsive to measures available to the IMF and BIS. Explosive developments in the currency markets imply a shift of power out of the hands of even the largest of the nation states and into the financial market casino. When the president of France, Francois Mitterand, attempted reforms which were not to the taste of the financial markets in the eighties, he was forced to stop. The British and Scandinavian governments were similarly cowed by the markets in 1992, the Mexican government in 1994, the governments of Thailand, Malaysia, Indonesia and South Korea in 1997, the government of Russia in 1998. Billions of speculative investment dollars can flow into or out of a country in seconds- and does. More recently the governments of Greece and Ireland have been struck. This "hot money" has become a kind of world government, and has inexorably eaten away the power of sovereign national states. In addition to causing such a power shift, the speculative money flourishes maximally where there is highest volatility- the opposite to the wishes of central bankers for stability.
In the sixties, proponents of floating exchange rates theorized that with the "discipline of the free market " volatility in currency exchange would disappear. A study by the OECD in 1995 showed that the opposite had happened. It is not really so hard to see why volatility rises with increased volume of trading. If, in 1986 when the daily volume was $60 billion, 5% of currency traders disliked our currency and sold, it meant a $3 billion move against our currency. The central bank could manage what they call an "open market" operation to buy back that currency and stop the fall. With volumes of currency trading many times greater today, no central bank has enough money to do so any longer. This is what Ben Bernanke, the chief of the Federal Reserve, meant last week when he said that "capital flows are once again posing some notable challenges for international macroeconomic and financial stability."
(In 1944, the Bretton Woods conference created five institutions, another of which is the World Bank. It exists to provide loans to developing countries for capital development with the aim of reducing poverty. Until recently, that has not been seen as part of the central system for financial management)
The value of our money is currently determined by a global casino where over 98% of trades are speculative. Those who save money or have a retirement plan are exposed to this risk, even if they don't personally invest. Their banks invest, and so do their pension funds. Those who have no savings are equally exposed when their tax money is used up to prevent the collapse of the financial system, and is not available to pay for garbage collection, schools, public libraries and so forth. Our money is a system of symbolic mutual confidence, and many past civilizations have fallen along with their money. Rather than debating interest rates, the threat of inflation, or the gold standard, we need to rediscover our communities and the kind of world in which we want to live together. I recommend the website of Bernard Lietaer.
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