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The man who saw the meltdown coming had another troubling insight: it will happen again
Since the global financial system started unraveling in dramatic
fashion two years ago, distinguished economists have suffered a crisis of their own. Ivy League professors who had trumpeted
the dawn of a new era of stability have scrambled to explain how, exactly, the worst financial crisis since the Great Depression
had ambushed their entire profession.
Amid the hand-wringing and the self-flagellation, a few more cerebral commentators started to speak about the arrival
of a “Minsky moment,” and a growing number of insiders began to warn of a coming “Minsky meltdown.”
“Minsky” was shorthand for Hyman Minsky, a hitherto
obscure macroeconomist who died over a decade ago. Many economists had never heard of him when the crisis struck, and he remains
a shadowy figure in the profession. But lately he has begun emerging as perhaps the most prescient big-picture thinker about
what, exactly, we are going through. A contrarian amid the conformity of postwar America, an expert in the then-unfashionable
subfields of finance and crisis, Minsky was one economist who saw what was coming. He predicteddecades ago, almost
exactly the kind of meltdown that recently the global economy.
In recent months Minsky’s star has
only risen. Nobel Prize-winning economists talk about incorporating his insights, and copies of his books are back in print
and selling well. He’s gone from being a nearly forgotten figure to a key player in the debate over how to fix the financial
But if Minsky was
as right as he seems to have been, the news is not exactly encouraging. He believed in capitalism, but also believed it had
almost a genetic weakness. Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed:
rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable
and dramatic collapse.
In other words, the
one person who foresaw the crisis also believed that our whole financial system contains the seeds of its own destruction.
“Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”
The president’s chief economic adviser warned Friday that the nation’s unemployment rate could stay “unacceptably high” for years to come — a situation that would seriously
complicate Barack Obama’s ability to convince Americans that he’s beating back the recession.
level of unemployment is unacceptably high,” National Economic Council Director Larry Summers said Friday. “And will, by all forecasts, remain unacceptably high for a number of years.”
comments came in a briefing with reporters ahead of Obama’s speech in New York City on Monday, marking the one-year
anniversary of the collapse of Lehman Brothers, an event widely regarded as having created a panic that caused the global economic meltdown.
with his gloomy forecast for unemployment, Summers said the economy is getting better and made the case that Obama’s $787 billion stimulus package and other
fiscal rescue steps headed off even more economic pain.
Ahead of the upcoming G-20 meeting in Pittsburgh, finance ministers met on September 5 and expressed
cautious optimism that financial markets were stabilizing and the global economy improving. But CFR Adjunct Senior FellowSteven Dunaway, who agrees there are some small indications that the global economy is recovering, says the scope
of the recovery remains uncertain. He says G-20 members have "worked reasonably well" on tackling the financial crisis "but
it hasn't been as good as everyone had anticipated when they first came together in November of last year." Overall he says
not to expect any major developments out of the G-20 meeting. However, he does note that a period of slow growth could prompt
many countries to take necessary policy actions to improve their medium-and long-term growth prospects
Is a new global reserve currency the
answer to relaunching growth?
to thought leaders from the principal world economies, the current international monetary system, reliant on the US dollar,
is deeply flawed, but a single viable alternative is not readily apparent. This was the outcome from the debate at the Annual
Meeting of the New Champions where they discussed the global currency reserve system.
March, China’s Central Bank Governor Zhou Xiaochuan sparked controversy when he proposed that the International Monetary
Fund create a new reserve currency – a proposal with enormous implications across Asia, which holds nearly US$ 4 trillion
in foreign currency.
“I strongly supported the proposal made by Governor
Zhou,” said Yu Yongding, Senior Fellow, Institute of World Economics and Politics, Chinese Academy of Social Sciences
(CASS), People's Republic of China and member of the Forum’s Global Agenda Council on International Monetary Systems.
However, panellists agreed that the creation of a new global currency to replace the dollar and other sovereign currencies
was not politically viable.
The U.S. dollar
is toast. Stick a fork in it. It's done. Look at these headlines:
UN wants new global
currency to replace dollar -- The dollar should be replaced with a
global currency, the United Nations has said, proposing the biggest overhaul of
the world's monetary system since the Second World War. (Sept. 8,
Dollar hits low for
year as gold tops $1,000 an ounce -- The dollar fell to a low for
the year Tuesday as gold prices shot past $1,000 an ounce... (Sept. 8,
FOREX -- U.S. dollar
slides to 2009 low vs euro (Sept. 8,
Seems like the
buck has nowhere to hide. But wait -- we've been here before.
Three years ago
(early 2006), nearly all forex market
observers called the “unexpected strength of the U.S. dollar” in 2005 one of
that year's "biggest surprises” (FT). Remember? Despite all the “crash
and burn” forecasts so popular in late 2004, “the greenback enjoyed its best
year against the euro and yen since 1999 and 1979 respectively." So unexpected
was the 2005 rally that even Warren Buffet, the Sage of Omaha who famously bet
“$20 billion or so” against the buck, was reportedly caught off guard by its
sudden and sustained turnaround.
U.S. government nervous about stimulus fraud,scams
As billions of dollars from the economic stimulus plan pour through the U.S. economy, members of Congress,
the administration and regulatory agencies are increasingly worried about the risks of fraud.
Earl Devaney told Congress on Thursday the Recovery Accountability and Transparency
Board he chairs is investigating those who may have misappropriated stimulus money.
His board has "forwarded more than 100 matters to various
IGs (inspector generals to ensure heightened scrutiny of specific procurements that board staff has identified as potentially
Accountants Misled Us
The accountants let us down.
That is one of the clear lessons
of the financial crisis that drove the world into a deep recession. We now know the major banks were hiding dubious assets off their balance sheets and stretching rules if not breaking
them. We know that their capital was woefully inadequate for the risks they were taking.
Efforts are now being
made to improve the rules, with some success. But banks have persuaded politicians on both sides of the Atlantic that the
real problem came not when their financial inadequacies were obscured by bad accounting, but when they were revealed as the
“There were important aspects of our entire financial system that
were operating like a Wild West show, huge unregulated opaque markets,” said the man whose job was to write the accounting
rules, Robert H. Herz, the chairman of the Financial Accounting Standards Board.
“The crisis highlighted how important better transparency around that system is,”
Mr. Herz added in an interview this week. “I would hope that would be a major lesson learned or relearned.”
some seem to have learned exactly the opposite lesson. Accounting rule makers at FASB and its international equivalent, the
International Accounting Standards Board, have been lambasted for efforts to improve transparency by forcing banks to disclose
what their dodgy assets are actually worth, as opposed to what the banks think they should be worth.
boards have tried to resist, but have been forced by political pressure to back down on some specifics. In the case of FASB,
the retreat took a few weeks after Mr. Herz was ordered to act at an extraordinary Congressional hearing. The international
board was given a long weekend to retreat, with the European Commission threatening to impose its own rules if the board did not cave in. Both boards tried to reduce the damage
by forcing more disclosures, but it is unclear how much good that will do. Neither was willing to defy the politicians.
RECORD REGULATORY REFORMS >>> Governments set new records in business
regulation reform during 2008/09, according to the IFC–World Bank Doing Business 2010 report. A record 131 countries made reforms.
That is more than 70
percent of the 183 economies covered by the report— the largest share in any
year since the annual report was first published in 2004. And this progress
came against the backdrop of a global economic crisis.
Doing Business 2010: Reforming through Difficult Times recorded 287 reforms between June 2008 and May 2009, up 20
percent from the previous year. Reformers around the world focused on making it
easier to start and operate businesses, strengthening property rights, and
improving commercial dispute resolution and bankruptcy procedures.
regulation can affect how well small and midsize firms cope with the crisis and
seize opportunities when recovery begins,” said Penelope Brook, Acting Vice
President for Financial and Private Sector Development for the World Bank
Group. “The quality of business regulation helps determine how easy it is to
reorganize troubled firms to help them survive difficult times, to rebuild when
demand rebounds, and to get new businesses started.”
activity is stabilizing or improving in most of the U.S., according to a new
government survey, adding to evidence that the worst recession since the 1930s
The Federal Reserve's
of economic conditions backs predictions by Fed Chairman Ben Bernanke and most
other analysts that the economy has started to grow again in the current
In the survey
Wednesday, all but one of the Fed's 12 regions indicated that economic activity
was "stable," showed "signs of stabilization" or had "firmed." The one exception
was the St. Louis region, which continued to report that the pace of decline in
economic activity appeared to be "moderating."
most Fed regions said they were "cautiously positive" about the economic
Country-by-Country Reporting: Holding Multinational Corporations
to Account Wherever They Are
Global Task Force Releases Recommendations for New Accounting System
for Multinational Corporations
The Task Force on Financial Integrity and Economic Development (Task Force)*
released a report today detailing a new system of accounting for multinational
corporations (MNCs) designed to increase transparency and curtail tax
Termed “country-by-country reporting” the new protocol would require MNCs to
disclose the full details of their commercial transactions by jurisdiction,
instead of the current system which requires reporting along product of division
lines. As much as 60 percent of global trade currently take place within MNCs,
which are not required to disclose many salient details of their trade practices
under the existing regulatory framework.
“Tax evasion by multinational corporations is one of the greatest drivers of
illicit capital flight out of the developing world,” said Global Financial
Integrity director Raymond Baker. “County-by-country reporting is a low-cost,
readily implementable way to ensure better business compliance with tax policy
and fair business practices. The Task Force applauds the UK’s announcement
earlier this week that it would push for country-by-country reporting at next
week’s meeting of the Group of 20 in Berlin.”
Top companies left themselves open to fraud in the Recession
Top companies have been left wide open to massive levels of fraud in the
recession because they did not have enough safety measures in place, new
research has claimed.
The Resilience to Fraud of UK PLC survey, published jointly by accountancy
firm MacIntyre Hudson and the Centre for Counter-Fraud Studies, looked at the
counter fraud systems in place within 135 public sector organisations and 32
FTSE 100 companies.
It gives a snapshot of firms’ susceptibility to fraud across the economy and
indicates there were major fraud-prevention problems before the recession,
leaving businesses vulnerable to the spike in fraud that followed the economic
The report revealed the largest FTSE companies were the most at risk, with an
overall 55 per cent risk to capital among FTSE companies with a combined annual
turnover of £180 billion.
Jim Gee, director of counter-fraud services at MacIntyre Hudson, and chairman
of the Centre for Counter-Fraud Studies, said: “The current spike in fraud
levels has a clear origin in the kind of weak preventative systems that this
report lays bare.”
The report showed that weak fraud prevention was higher within the public
sector, but this is largely explained by the poor systems in place among smaller
departments where little capital was in fact at risk, whereas FTSE companies
perform poorly in the study irrespective of their size.
A new report by Global Financial Integrity,"Illicit Financial Flows from
Developing Countries: 2002-2006," shows that the developing world is losing an
increasing amount of money through illicit capital flight each year.
The dollar should be replaced with a global currency, the United Nations has
said, proposing the biggest overhaul of the world's monetary system since the
Second World War.
A number of
countries, including China and Russia, have suggested replacing the dollar as
the world's reserve currency
In a radical report, the UN Conference on Trade and Development (UNCTAD) has
said the system of currencies and capital rules which binds the world economy is
not working properly, and was largely responsible for the financial and economic
It added that the present system, under which the
dollar acts as the world's reserve currency, should be subject to a wholesale reconsideration.
Although a number of countries, includingChinaand Russia, have suggested replacing
the dollar as the world's reserve currency,the UNCTAD reportis the first time a
major multinational institution has posited such a suggestion.
In essence, the report calls for a new Bretton Woods-style system of managed
international exchange rates, meaning central banks would be forced to intervene
and either support or push down their currencies depending on how the rest of
the world economy is behaving.
SEE SUMMARY OF UNCTAD REPORT
CRISIS WARNING JULY 25, 2007 ---CLICK HERE
CRISIS WARNING JULY 25, 2007 ---CLICK HERE
U.N. agency sees no early
* Recent rebound said driven by speculation
* Multi-currency reserve system could help in future
United Nations economists said on Monday there
would be no early recovery from global recession and warned that any move to
ease back quickly on government stimulus programmes could make the crisis
In its annual report, the U.N. trade and development agency UNCTAD also urged
the creation of a new world reserve system using several currencies rather than
just the U.S. dollar, and called for tough controls on cross-border financial
"The likelihood of a recovery in the major developed countries that would be
strong enough to bring the world economy back to its pre-crisis growth path in
the coming years is quite low," the report said.
The US Federal Reserve's policy of printing money to buy Treasury debt
threatens to set off a serious decline of the dollar and compel China to
redesign its foreign reserve policy, according to a top member of the Communist
The United States has lost its place as the world's most competitive economy, mainly because of the financial crisis and
accumulated fiscal deficits, according to a survey released Tuesday.
The U.S. is second ranked in a poll of over 13,000 business leaders conducted by the Geneva-based World Economic Forum,
behind Switzerland. Singapore is third and Sweden comes forth.
"Given that the financial crisis originated in large part in the United States, it is hardly surprising that there
has been a weakening of the assessment of its financial market sophistication," the survey said. "The country's
greatest weakness continues to be related to its macroeconomic stability."
UN plans for new world monetary system have come too late
You might not have heard about the United Nations Conference for Trade and Development before. But this wing of the UN
has just produced what I think may well be the most important document on economic policy since the great financial crisis
of the 2000s.
Barack Obama accused of making 'Depression' mistakes
Barack Obama is committing the same mistakes made by policymakers during the
Great Depression, according to a new study endorsed by Nobel laureate James
His policies even have the potential to
consign the US to a similar fate as
Argentina, which suffered a painful and humiliating slide from first to Third
World status last century, the paper says.
There are "troubling similarities"
between the US
President's actions since taking office and those which in the 1930s sent the US
and much of the world spiralling into the worst economic collapse in recorded
UNCTAD Trade and Development Report 2009 presents a gloomy
global economic outlook in the context of the ongoing global financial and
economic crisis. It looks at the channels through which this deep crisis, which
originated in developed countries, is spreading to developing and transition
economies: through financial flows, international trade and commodity prices,
migrants´ remittances and external debt.
The Trade and Development Report 2009 examines in some detail the short-term
policy responses taken to tackle the immediate effects of this crisis. These
include fiscal stimulus packages, monetary policy easing, and support for ailing
financial institutions. Monetary easing and large bailout operations may have
prevented a meltdown of the financial system, but they have been insufficient to
revive global demand and halt rising unemployment. Countercyclical fiscal policy
measures that have a direct effect on aggregate demand should be reinforced, in
a coordinated global manner.
In analysing the causes of the crisis, the Trade and Development Report 2009
focuses on the role of excessive risk-taking made possible by financial
deregulation and innovation in obscure financial instruments. It highlights the
problem of the predominance of financial markets over the fundamentals of the
real economy. The experience with this crisis proves that free financial markets
do not lead to optimal social and macroeconomic outcomes, and suggests that the
relationship between the State and market forces needs to be fundamentally
reviewed. The Trade and Development Report 2009 discusses why and how the
overall effectiveness of strengthened financial regulation will depend on the
way in which measures for financial reform at the national level are combined
with a reform of the international monetary and financial system.
Given the prevailing major shortcomings in the international financial and
monetary system, UNCTAD draws attention to some elements of reform of the
international financial architecture, which is long overdue. These include
effective capital account management, strengthening the role of special drawing
rights, and a multilaterally agreed framework for exchange rate management.
These reforms imply a fundamental rethinking of global financial governance to
stabilize trade and financial relations by reducing the potential for gains from
speculative capital flows. This will reduce the likelihood of similar crises in
the future and help create a stable macroeconomic environment conducive to
growth and smooth structural change in developing countries.
Another pressing preoccupation for peoples and governments around the world
continues to be the threat of global warming, which implies considerable risks
for living conditions and developmental progress. Against this background, the
Trade and Development Report 2009 is addressing the question of how increased
efforts aimed at climate change mitigation can be combined with forward-looking
development strategies and rapid growth in developing countries. Climate change
mitigation should be associated with a process of global structural change, in
which demand will shift from greenhouse gas-intensive modes of production and
consumption to more climate-friendly modes. The challenge for developing
countries will be to seize the growth opportunities created by the new and
fast-growing markets in "environmental goods".
Statement by G-20 Finance Ministers, Central Bankers on
Finance officials from the Group of 20 largest economies Saturday agreed to a global framework
for bank capital rules, under which banks will face higher capital requirements, and agreed to guidelines on banker pay. Below
is the verbatim text of their statement issued Saturday on the global economy.
Meeting of Finance Ministers and Central Bank Governors, London, 4-5 September 2009
1. We, the G20 Finance Ministers and Central Bank Governors, met ahead of the Pittsburgh Summit to assess our progress
in delivering the Global Plan for Recovery and Reform and agree further actions to ensure sustainable growth and build a stronger
international financial system. We reiterated the need for swift and full implementation of all the commitments made at the
Washington and London Summits and have agreed the further necessary steps to strengthen the financial system, as set out in
the accompanying declaration.
2. Our unprecedented, decisive and concerted policy action has helped to arrest the decline and boost global demand. Financial
markets are stabilizing and the global economy is improving, but we remain cautious about the outlook for growth and jobs,
and are particularly concerned about the impact on many low income countries. We will continue to implement decisively our
support measures and expansionary monetary and fiscal policies, consistent with price stability and long-term fiscal sustainability,
until recovery is secured.
3. We must build on what we have already achieved and tackle the significant challenges that lie ahead. It is vital for
growth that we act to support lending, including dealing with impaired assets and conducting robust stress tests where necessary.
We must promote employment through structural policies, active labor market policies, and training and education. We will
work to address excessive commodity price volatility by improving the functioning and transparency of physical and financial
markets and promoting a closer dialogue between producer and consumer countries. We welcome the swift implementation of the
$250 billion trade finance initiative and reaffirm our commitment to fight
all forms of protectionism and to reach an ambitious and balanced conclusion to the Doha Development Round.
4. We agreed the need for a transparent and credible process for withdrawing our extraordinary fiscal, monetary and financial
sector support as recovery becomes firmly secured. Working with the IMF and the FSB we will develop cooperative and coordinated
exit strategies, recognizing that the scale, timing and sequencing of actions will vary across countries and across the types
of policy measures.
5. We will work to achieve high, stable and sustainable growth, which will require orderly rebalancing in global demand,
removal of domestic barriers and promotion of the efficient functioning of global markets. The need to combat climate change
is urgent, and we will work towards a successful outcome in Copenhagen.
6. We have made significant progress in strengthening the IFIs, but more needs to be done. We are close to completing
the delivery of $850 billion of additional resources agreed in April, including an expanded, more flexible New Arrangement
to Borrow; and $50 billion to support social protection and safety nets, boost trade and safeguard development in low income
countries. We welcome the overhaul of the IMF’s lending facilities. We encourage the Multilateral Development Banks
to make full use of their balance sheets and reaffirm our commitment to ensure they have appropriate capital, recognizing
that they are fully on track to deliver $100 billion of additional lending. In the period ahead we need to focus on providing
resources to low income countries to support structural
reforms and infrastructure development.
7. We look forward to prompt implementation of the 2008 IFI governance reforms, and will complete World Bank reforms by
Spring 2010 and the next IMF quota review by January 2011. We recognize that the IMF should remain a quota-based organization;
and as part of the reforms, the voice and representation of emerging and developing economies, including the poorest, must
be significantly increased to reflect changes in the world economy. To achieve this we look forward to substantial progress
in Pittsburgh. We also reaffirm our commitment to increase accountability, strengthen the involvement of Fund Governors in
strategic oversight, and agree to move to an open, transparent and merit-based selection of IFI management. To improve the
role and effectiveness of the Fund in supporting stronger cooperation and ensuring a more sustainable global economy and international
financial system, candid, evenhanded, and independent surveillance will be vital. We call on the IMF, working with other international
institutions, to continue assessing our actions to secure a sustainable
G20 pledges tougher bank action
Finance ministers from the world's most powerful economies have agreed
a series of measures to try to regulate the global banking system.
They want a system that rewards long-term performance
rather than short-term risk-taking.
However the G20 meeting in London did not agree on specific limits on the amounts
individual bankers get paid.
Britain, the US and Canada opposed the idea, but the Financial Stability Board is to examine
It will report back to the summit of G20 leaders in Pittsburgh,
Pennsylvania later this month.
“ Critically now the job is to make sure that you translate those principals into practical propositions
that actually bite and actually work ” Alistair Darling
The G20 countries agreed on measures requiring banks to disclose the pay and bonuses of their highest-paid employees
and to allow bonuses to be "clawed back" if decisions which seemed successful later go wrong.
The FSB has also been
asked to look at the desirability of new rules which would allow regulators to rule on whether the total pool of cash set
aside by a bank for bonuses is excessive, given its long-term financial stability and strength.
Signs of recovery
also pledged to continue financial support for the global economy until recovery from recession is secured.
they would develop co-ordinated "exit strategies" to deal with ballooning public deficits once the recession is over.
But they warned that although there were signs of recovery in the world economy,
that recovery would not have happened without massive intervention from governments - and all bankers should take note that
they owed their salvation to action by taxpayers.
US Treasury Secretary Tim Geithner said the momentum for financial
reform needed to be kept up despite the signs of an upturn.
"Actions (by the G20) have pulled the global economy back
from the edge of the abyss. The financial system is system is showing signs of repair," he said.
"However, we still
face significant challenges ahead. Unemployment is unacceptably high. Conditions for a sustained recovery led by private demand
are not yet established."
UK Chancellor Alistair Darling said all bankers were obliged
"to make sure that their pay practices are responsible".
He said: "Above all we are determined to take action to stop
banks or other financial institutions getting themselves into a situation where their pay-and-reward practices actually encourage
people to take risks which bring their institutions into a situation where they could be brought down with catastrophic results."
possible regulation of bonuses, he said: "If you have got an institution that is struggling or it's in the process of rebuilding
itself the regulator could say that pool set aside for bonuses is really too big."
Mr Darling added: "Critically now
the job is to make sure that you translate those principals into practical propositions that actually bite and actually work.
"We need to have standards that are observed right across the world."
US Treasury Secretary added: "Changing compensation practices fundamentally will be fundamental to future reform, and we're
going to move forward and do that."
International Monetary Fund chief Dominique Strauss-Kahn
said that governments had to act.
"The problem is we need to go beyond agreement. We need to have concrete measures."
also announced that the IMF had now collected pledges for all the $500bn additional loan facility that had been agreed in
principle at the G20 London summit in April, with Mexico, India and Singapore all chipping in.
But he accepted that
the hard questions on how to increase the representation of the poor and emerging countries in the IMF was not yet resolved.
have agreed to raise "significantly" the say of emerging nations on the world stage.
But concrete proposals will not
be put until January 2011.
China has already called for a 7% cut in the voting power of rich countries in the IMF, while
the US reportedly suggested 5% - almost all of it the expense of European nations, who are over-represented at the moment.
Meeting of Finance Ministers and Central Bank Governors,
London, 4-5 September 2009
DECLARATION ON FURTHER STEPS TO STRENGTHEN THE FINANCIAL SYSTEM
We, the G20 Finance
Ministers and Central Bank Governors, reaffirmed our commitment to strengthen the financial system to prevent the build-up
of excessive risk and future crises and support sustainable growth.
We have made substantial progress
in delivering our ambitious plan, which will ensure a robust and comprehensive framework for global regulation and oversight.
The Financial Stability Board and the Global Forum on Transparency and Exchange of Information have expanded their
and membership. The regulatory bodies have agreed to more stringent capital requirements for risky trading activities,
off-balance sheet items, and securitised products; they have developed proposals to address procyclicality, issued im
portant principles on compensation
and deposit insurance, and established over thirty supervisory colleges.
more needs to be done to maintain momentum, make the system more resilient and ensure a level playing field, including
the following actions:
1. Clear and identifiable progress in 2009 on delivering the
following framework on corporate governance and compensation practices. This will prevent excessive short-term risk taking and
mitigate systemic risk, on a globally consistent basis building on and strengthening the application of the FSB principles:
o greater disclosure and transparency of the level and structure of remuneration for those whose actions have
a material impact on risk taking; o global standards
on pay structure, including on deferral, effective clawback, the relationship between fixed and variable remuneration,
and guaranteed bonuses, to ensure compensation practices are aligned with long-term value creation and financial stability; and, o corporate governance reforms to ensure appropriate board oversight
of compensation and risk, including greater independence and accountability of board compensation committees.
call on the FSB to report to the Pittsburgh Summit with detailed specific proposals for developing this framework, which
could be incorporated into supervisory measures, and closely monitoring its delivery. We also ask the FSB to explore
possible approaches for
limiting total variable remuneration in relation to risk and long-term performance.
G20 governments will also explore ways to address non-adherence with the FSB principles.
Stronger regulation and oversight for systemically important firms, including: rapid progress on developing tougher prudential
requirements to reflect the higher costs of their failure; a requirement on systemic firms to develop firm-specific contingency
plans; the establishment of
crisis management groups for major cross-border firms to strengthen international
cooperation on resolution; and strengthening the legal framework for crisis intervention and winding down firms.
Rapid progress in developing stronger prudential regulation by: requiring banks to hold more and better quality capital
once recovery is assured; introducing countercyclical buffers; developing a leverage ratio as an element of the Basel
framework; an international set of
minimum quantitative standards for high quality liquidity; continuing
to improve risk capture in the Basel II framework; accelerating work to develop macro-prudential tools; and exploring
the possible role of contingent capital. We call on banks to retain a greater proportion of current profits to build
capital, where needed, to support lending.
4. Tackling non-cooperative jurisdictions
(NCJs): delivering an effective programme of peer review, capacity building and countermeasures to tackle NCJs that fail
to meet regulatory standards, AML/CFT and tax information exchange standards; standing ready to use countermeasures
against tax havens from March 2010; ensuring developing countries benefit
from the new tax transparency,
possibly including through a multilateral instrument; and calling on the FSB to report on criteria and compliance against
regulatory standards by November 2009.
5. Consistent and coordinated implementation
of international standards, including Basel II, to prevent the emergence of new risks and regulatory arbitrage, particularly
with regard to Central Counterparties for credit derivatives, oversight of credit ratings agencies and hedge
and quantitative retention requirements for securitisations.
6. Convergence towards
a single set of high-quality, global, independent accounting standards on financial instruments, loan-loss provisioning,
off-balance sheet exposures and the impairment and valuation of financial assets. Within the framework of the independent accounting
standard setting process, the IASB is encouraged to take account of the Basel
Committee guiding principles
on IAS 39 and the report of the Financial Crisis Advisory Group; and its constitutional review should improve the involvement
of stakeholders, including prudential regulators and the emerging markets.
"The deal on banks compensations wants to send a wider
message: it does not make sense that banks manage governments and politics" Tremonti said at the sidelines of G20 meeting.
does not make sense that banks are larger than governments since their problems become governments' problems."
have raised a lot of money from governments, especially abroad, but they are not lending enough to companies... this is a
problem also for Italy"
GERMAN DEPUTY FINANCE MINISTER JOERG ASMUSSEN ON EXIT
one said the crisis is already over. We are seeing a stabilization."
"No one said we should today withdraw the
expansive monetary, fiscal stimulus and financial market stabilization measures, but there was a consensus that we should
prepare so that in the future we should withdraw these measures in a coordinated and cooperative way."
PRIME MINISTER GORDON BROWN:
ON G20 COOPERATION:
"Twelve months ago people were afraid for their
savings as bank after bank threatened to fall. Even six months ago people were still talking about the possibility of a Great
We are at a new and critical juncture for cooperation in the global economy.
not the time for complacency or over-confidence.
ON REMOVING STIMULUS TOO EARLY
It would be an error
of historic proportions if we were to repeat the errors of the 1930s.
recovery sustainable does mean, in my view, avoiding unsustainable imbalances between countries.
has been driven, as everybody knows, by consumers in the United States and other deficit countries. Already in the United
States, in Britain and other countries we are seeing savings increase. In the medium to longer term this adjustment should
be complemented both by enhanced demand that we will see from emerging markets ... and by structural reforms also in emerging
and advanced economies."
"We need the world now to come together with careful and co-ordinated action ... It
makes sense for countries with large current account deficits to boost exports. It makes sense also for countries with large
current account surpluses to increase the demand for goods and services from other countries."
growth forecasts we have now for 2010 are in many cases based on the key assumption that the effective global fiscal stimulus
of 2010 will be of the same scale as 2009.
"Given the risks we face this is clearly not the time for economic
complacency. The stakes are simply too high to get these judgments wrong, so to decide now that it is time to start withdrawing
and reversing the exceptional measures we have take would, in my judgment, be a serious mistake.
"On the contrary,
with more than half of the total five trillion (dollar) fiscal expansion yet to start, I believe the prudent course is for
G20 countries to deliver these fiscal plans and the stimulus packages that have been put in place and make sure that they
are implemented in full both this year and the next."
sG20: principales decisiones de los ministros de Finanzas reunidos en Londres
Las principales decisiones de los ministros de Finanzas y gobernadores de los bancos centrales
del G20, anunciadas el sábado en un comunicado al término de su reunión en Londres, previa a la cumbre del G20 en Pittsburgh
(Estados Unidos) los 24 y 25 de septiembre.
MANTENER LOS PLANES DE RECUPERACIÓN Y PREPARAR LA SALIDA DE
- Los ministros destacan que "los mercados financieros se estabilizan y la economía mundial mejora",
pero se mantienen "prudentes sobre las perspectivas de crecimiento y de empleo".
- Seguirán aplicando las medidas
de recuperación "hasta que la recuperación esté asegurada".
- Sin embargo, quieren "un proceso transparente y
creíble" para suspender "esas medidas una vez que la recuperación económica esté asegurada sólidamente" y se comprometen a
desarrollar "estrategias de salida cooperativas y coordinadas", variando según los países.
PARA ENMARCAR MEJOR LAS PRIMAS
- Los ministros son proclives a "una mayor transparencia en cuanto al nivel y
a la estructura de las remuneraciones" de banqueros y operadores.
- Solicitan también que haya normas internacionales
sobre las primas, garantizando sobre todo que su pago sea repartido en el tiempo, incluyendo mecanismos de reembolso o sanción,
en caso de ganancias insuficientes.
- Hacen un llamado al Consejo de Estabilidad Financiera (FSB en sus siglas
en inglés) "para que presente en la cumbre de Pittsburgh" del G20, programada para los 24 y 25 de septiembre, "proposiciones
específicas y detalladas" sobre estos asuntos.
- De este modo, el FSB deberá explorar "los posibles enfoques
para limitar el monto total de las remuneraciones variables, en relación con el riesgo y los resultados a largo plazo".
Por último, los países del G20 examinarán sanciones "contra el irrespeto" de estos principios.
CONTRA LOS PARAISOS FISCALES QUE NO COOPEREN
Los ministros se declararon dispuestos a sancionar "a partir de
marzo de 2010" los paraísos fiscales que rechacen someterse a las reglas internacionales en materia de intercambio de información
FONDOS PROPIOS PARA LOS BANCOS
Los ministros prometen "avances rápidos" para reforzar
la regulación de los bancos. Estos deberán poseer, una vez que la recuperación esté asegurada, "un capital más elevado y de
mejor calidad", y consagrar una mayor parte de sus beneficios para la reconstitución de fondos propios.
LA REFORMA DE LAS INSTITUCIONES FINANCIERAS
- Los ministros llaman a "una rápida puesta en acción de las reformas
de la gobernanza" del Fondo Monetario Internacional y del Banco Mundial adoptadas el año pasado.
se comprometen a terminar "las reformas del Banco Mundial en la primavera (boreal) de 2010", en favor de una mayor representación
"de los países emergentes y en desarrollo, incluyendo los más pobres".
Whenever you find you
are on the side of the majority, it is time to pause and reflect
--- Mark Twain
We have never observed
a great civilization with a population as old as the United States will have in the twenty-first century; we have never observed
a great civilization that is as secular as we are apparently going to become; and we have had only half a century of experience
with advanced welfare states...Charles Murray
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