IMF Managing Director Dominique Strauss-Kahn Calls for New Global Approaches to Post-Crisis World

Editor's Note:  Can anyone say "Problem, Reaction, Solution"?  Clearly the global elites are capitalizing on the Global Political Awakening; in large part, deliberately engineered by them, to make the people of the world beg for a New World Order in the form of a One World Government and Global Currency.  You can certainly plan on the economic crises to worsen significantly before the solution is fully implemented.


“In designing a new macroeconomic framework for a new world”, he stated, “the pendulum will swing—at least a little—from the market to the state."

IMF

In a speech entitled “Global Challenges, Global Solutions” at George Washington University in Washington, D.C. today, Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), called for a new approach to economic policymaking in the wake of the recent global crisis. He singled out three areas for improvement: a new approach to macroeconomic and financial sector policies, a new approach to social cohesion, and a new approach to cooperation and multilateralism.

Discussing the current economic situation, Mr. Strauss-Kahn noted that the global recovery is unbalanced both between and within countries, and the global outlook is still beset by uncertainty. He pointed in particular to the Middle East, noting that it is going through an “historic transformation” as “citizens are seeking greater freedom, and a fairer distribution of economic opportunities and resources”. The immediate challenge for the Middle East, he stated, was “to preserve social cohesion without undermining macroeconomic stability”.

Banks should be broken up, Bank of England Governor Mervyn King warns

Mervyn King, Governor of the Bank of England, has thrown his weight behind breaking up the banks as part of wider reforms to protect the taxpayer from another financial industry meltdown.

Mervyn King: Reuters image

Philip Aldrich
Telegraph

In a speech to the Buttonwood Gathering in New York, he set out his vision for a banking industry that does not imperil the next generation. He warned creditors that "they will bear losses in the event of failure" and stressed that banks in the future must be "financed much more heavily by equity rather than short-term debt".

Addressing the option of separating investment banking from retail banking, he said: "If there is a need for genuinely safe deposits the only way they can be provided, while ensuring costs and benefits are fully aligned, is to insist such deposits do not coexist with risky assets."

He said such a radical measure "explicitly recognises that the pretence that risk-free deposits can be supported by risky assets is alchemy" and argued that a simple break-up would make it harder for banks to work around the rules.

"The attraction of the more radical solutions is that they offer the hope of avoiding the seemingly inevitable drift to ever more complex and costly regulation," he said. "The advantage of these types of more fundamental proposals is that no tax or capital requirement needs to be calibrated."

Banks are already facing the toughest regulatory overhaul in years with the capital and liquidity buffers being introduced under Basel III. However, Mr King said Basel is only the start as "even the new levels of capital are insufficient to prevent another crisis". The Goverment's £2.5bn bank levy is also "not a silver bullet", he said: "In the area of financial stability, it makes sense to have both belt and braces."

Banks have attacked new regulations and taxes for lumbering the industry with such high costs economic growth will suffer, claiming that as many as 10m fewer jobs will be created over five years as a result. Mr King dismissed the argument, saying: "The benefits to society, most obviously through greater financial stability, but also through factors such as higher tax revenue, are likely to swamp any change in the private costs faced by banks."

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G20 Agreement Gives Emerging Countries More Power in IMF

Lesley Wroughton
Reuters

A G20 agreement to give emerging market countries more power in the International Monetary Fund opens the door for breakthroughs on easing global tensions over trade imbalances.

The surprise deal reached at weekend meetings of finance ministers from the Group of 20 in South Korea shifts IMF voting power to under-represented emerging countries like China, India, Brazil and Turkey.


Countries like the United States are betting that with greater representation emerging economies such as China will be more willing to address the trade distortions causing currency volatility and threatening increased protectionism.


The deal avoided a widening of the gulf between emerging and developed nations and a chaotic ending to a G20 meeting in which the United States failed to convince China and others to agree to targets to limit current account imbalances.

The IMF agreement also spares the G20 from losing credibility, opening the way for G20 heads of state, meeting in Seoul on November 11 and 12, to handle more politically difficult decisions on fixing the trade imbalance problem.

Treasury Secretary Timothy Geithner flew to China on Sunday for further talks with Chinese authorities in the hopes of finalizing a currency deal before the Seoul summit.

Youssef Boutros-Ghali, Egypt's finance minister who heads the IMF's steering policy panel, the International Monetary and Financial Committee, said problems in the world economy could not be addressed without acknowledging the rising clout of emerging economies.

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IMF Head Says Officials at G20 Agreed on "Biggest Reform Ever"

Rebecca Christie and Rainer Buergin
Bloomberg

Group of 20 nations agreed on an overhaul of the International Monetary Fund that gives a larger voice to emerging market nations, IMF Managing DirectorDominique Strauss-Kahn said.

More than 6 percent of voting rights will be reallocated to underrepresented emerging-market nations and Europe will give up two board seats in the “biggest reform ever in the governance of the institution,” Strauss-Kahn told reporters today in Gyeongju, South Korea. The G-20 also agreed on the structure for a “financial safety net” to stop nascent financial crises before they speed out of control, he said.

The IMF’s board may approve the package in the first week in November, and it will probably take a year for the changes to be put in place, Strauss-Kahn said. The package includes a shift in the composition of the IMF’s executive board and the fund’s 10 biggest shareholders.

Strauss-Kahn called the deal a “historical agreement” as the Washington-based lender takes on a larger role in monitoring the world’s economies, currencies and capital flows. South Korea, the host of this weekend’s meeting of G-20 financial chiefs, proposed the safety net.

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The New World Order of Global Markets

Tectonic plates are shifting as emerging markets become major drivers of the developed world.

Bob Lenzner
Forbes

The best minds in finance--George Soros, Mohammed El-Erian, Larry Summers, Joseph Stiglitz and Robert Rubin--were not exactly raving bulls at the Financial Times conference on "The Future of Finance" this week. They were not the force driving the Dow Jones industrial average through 11,000 Friday, rather they were arguing convincingly of the constraints evident in the global economy that are bound to make investing anywhere more difficult and different than ever before.

Martin Wolf and Gillian Tett, FT editors, did a superb job of drawing out the puzzling tensions acutely active in the global economy. Food for thought: Wolf pointed out that China (20%) and India (8%) were both still only small fractions of the GDP of the U.S. In other words, the emerging economies are fast growing midgets versus the slow growing giant. "The potential is unimaginable and vast," said Wolf, "We have never had a low per capita income country with such responsibility and power."

One conclusion was crystal clear: Expect realignments in financial power both globally and nationally. The financial services industry worldwide will never be the same. Asian and Latin American banks survived the storm better than U.S. and European banks. Therefore, the global pecking order among financial institutions is shifting.

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