Monday, November 17, 2008

G20 - Who They Are And What They Said

What is the G20 and why should you care.
The members of the G-20 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. To ensure global economic fora and institutions work together, the Managing Director of the International Monetary Fund (IMF) and the President of the World Bank, plus the chairs of the International Monetary and Financial Committee and Development Committee of the IMF and World Bank, also participate in G-20 meetings on an ex-officio basis.

The G-20 thus brings together important industrial and emerging-market countries from all regions of the world. Together, member countries represent around 90 per cent of global gross national product, 80 per cent of world trade (including EU intra-trade) as well as two-thirds of the world's population. The G-20's economic weight and broad membership gives it a high degree of legitimacy and influence over the management of the global economy and financial system.
Well, if you care at all what the outcome was of this past weekend's G20 Summit, where world financial leaders assembled to lay the foundation for "economic global co-operation", then take a look at the transcript of what was agreed upon.

Here are a few snippets:
"Our work will be guided by a shared belief that market principles, open trade and investment regimes, and effectively regulated financial markets foster the dynamism, innovation, and entrepreneurship that are essential for economic growth, employment, and poverty reduction"
"- encourage the World Bank and other multilateral development banks (MDBs) to use their full capacity in support of their development agenda, and we welcome the recent introduction of new facilities by the World Bank in the areas of infrastructure and trade finance."
"-- The IMF, expanded FSF, and other regulators and bodies should develop recommendations to mitigate pro-cyclicality, including the review of how valuation and leverage, bank capital, executive compensation, and provisioning practices may exacerbate cyclical trends. "
"all G-20 members commit to undertake a Financial Sector Assessment Program (FSAP) report and support the transparent assessments of countries' national regulatory systems. "
So who will be running YOUR country's economy? If this body's authority has any teeth at all, the International Monetary Fund (IMF), Financial Stability Forum (FSF) and the World Bank Group and other multilateral development banks will be setting the standards globally.

European Union President, and French Leader Nicholas Sarkozy, is seeking stability in global currencies - perhaps hinting at one global currency.

It looks like Secretary Paulson and Fed Chairman Ben Bernake might just have to answer to a higher power if they are going to abide by any "co-operation agreements" made at this summit. So much for anyone's national sovereignty when it comes to finance if this body is given any real authority.

This Wall Street Journal article suggests a global gold standard.
"it was French President Charles de Gaulle who best made the case in the 1960s. Worried that the U.S. would be tempted to abuse its role as key currency issuer by exporting domestic inflation, he called for the return to a classical international gold standard. "Gold," he observed, "has no nationality."
The key to the whole crisis that we see around us is a stable dollar, but a global currency or global control of any nation's currency would be like the Federal Reserve on steroids.