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| A "Rare Triumph of Susbstance" in London |
| 2009-04-03 |
| A Rare Triumph of Substance at the Summit So says the author International economic summits deserve to be regarded with skepticism: The most important decision to come out of them is usually the call for yet another meeting. But yesterday's G-20 meeting in London was an exception. While President Obama may have overstated things a bit when he declared it a "turning point" for the now-shrinking global economy, the meeting did manage to boost the confidence of financial markets, inject another trillion dollars into the financial system and provide needed political cover for world leaders to take unpopular actions back home. Ever since this round of G-20 consultations was launched last year by an insistent President Nicolas Sarkozy, there's been a distinctly French accent to the process. Implicit in the agenda has been a critique of the Anglo-American economic model that, in the European imagination, was the root cause of the current economic crisis. Sarkozy's aim was nothing less than a rewrite of the rules for global capitalism to conform to the more civilized norms of the continental European model. At the same time, British Prime Minister Gordon Brown was keen on creating a new global financial architecture to replace the creaky Bretton Woods financial institutions that failed to prevent a series of international financial crises and now seem oddly out of sync with the global economy. To the American ear, much of this sounded overdone and overly ambitious. How about just Ewwu-ropean? While the financial crisis revealed an urgent need to better coordinate regulation of global institutions and capital flows, nobody seriously thought that any country - not the United States, and certainly not France - would cede its sovereign powers to an international bureaucracy. After all, the most recent attempt at international regulatory coordination - the Basel II standards on bank capital - wound up leaving European banks woefully undercapitalized when the current crisis hit, requiring bank bailouts that in many cases were much larger, in relation to the size of the countries' economies, than in the United States. U.S. banks, by comparison, had relatively more capital, thanks to those worrywarts at the FDIC, who had fought the looser Basel II standards despite their strong support from the banks and their always-accommodating regulators at the Federal Reserve. The push for broader, tighter cross-border financial regulation, in fact, came largely in response to the light-touch approach of the Bush administration. But whatever transatlantic tension once existed over that issue pretty much melted away last week when Tim Geithner outlined the new administration's regulatory reform proposal, which could just as easily have been written at the French Finance Ministry as at the U.S. Treasury. Obamanomincs has arrived! In the end, yesterday's communique, with its promise of a global regulatory crackdown, was an easy win for all concerned. Sarkozy and German Chancellor Angela Merkel could declare victory over unfettered Anglo-American capitalism, while Obama now has added political ammunition for taking on the banks, hedge funds, rating agencies and private-equity firms that will try to water down his proposals. While that may constitute a turning point for Anglo-American capitalism, it is hardly the death knell. Some think there's still room for debate on that issue. Gordon Brown, meanwhile, emerged from yesterday's talks to declare an end to "the old Washington consensus," the now-derogatory description for the policy prescription of open borders, floating exchange rates and fiscal prudence long favored by the World Bank and the International Monetary Fund. What emerged yesterday from the G-20, however, amounts more to reform than to revolution. Member countries committed themselves to adding $850 billion to the resources available to the IMF and regional development banks to mount rescues of countries in financial distress, with instructions that the money be used not only for traditional purposes such as debt rollover, bank recapitalization and balance-of-payments support, but also for more "flexible" goals such as stimulus spending, infrastructure investment, trade finance and social support. And just as the old G-7 has given way to the enlarged G-20, the governance structure of the fund and the bank will be revised to give the bigger developing countries the authority they now deserve. Ahh, yessss. China and India deserve authority... |
| Posted by:Bobby |
| #4 But we're not supposed to know that, Barbara. We're supposed to think it was the Lightworker. |
| Posted by: Seafarious 2009-04-03 12:33 |
| #3 Ding-ding-ding! By George, I think NS got it! |
| Posted by: Barbara Skolaut 2009-04-03 09:29 |
| #2 Or more likely a change in the mark to market rules. |
| Posted by: Nimble Spemble 2009-04-03 08:18 |
| #1 Could it be the stock market surged when Wall Street saw Obama meeting with real leaders on issues, not one of his daily meetings with the know nothings within his administration? |
| Posted by: Dino Pheanter4996 2009-04-03 08:01 |