December 30, 2008 (the date of publication in Russian)

Andrey Kobyakov


Creditor nations to the USA ought to unite during the next G20 summit

G20 summit, which took place on November 2008 in Washington, had a mission to point ways out of the world financial crisis. We have already written about extremely small results of the past forum (see A MANIFESTATION OF IMPOTENCE). But even though Nikolas Sarkozy, the President of France, promised before the start of the event that leading countries of the world would begin joint actions aimed at large-scale and radical changes, the productivity of the very global forum turned to be close to zero – that's also what we have already written about.

However the actuality of the very question didn't decrease because of that. And more, the "second round" of the leading countries negotiations about possible coordination of anti-crisis arrangements and world finance reformation is going to take place in the middle of the year 2009. So if the future participants of the meeting (and Russia among them) want it to be not that useless, they have to work out their proposals about substantial summit agenda beforehand. And enlisting the support of a group of interested countries for expressing common ideas would be even more intelligent.

Understanding of importance of reforming world financial system ripened long ago. People began to speak about the necessity of world finance architecture reconstruction already at the time of previous international crisis of 1997-1998. I'll remind, that it was called "Asian", though actually it was global. But as it only touched upon the main centers of world financial system, all the conversations about the necessity of reforming "successfully" ended up after the crisis began to reduce and everything fell back into place.

At that time Bill Clinton was one of the main persons (now it's Sarkozy), who spoke about the reforming more than anyone else. In that way, the necessity of changing the existing financial system was stated by world leaders long ago, not mentioning the objective preconditions for this, which appeared even before that.

As for measures which are proposed now, I can say they are mostly of a cosmetic kind. Of course, there is a need in reforming rating agencies. They have been blamed already for a few decades. Serious reproaches about their work appeared already during the Asian crisis. As well as reproaches for IMF, which turned to be an ineffective instrument for overcoming financial problems: its recommendations were considered to be not the best receipt of struggling against the crisis. The ideas, which are expressed these days, didn't go beyond the scope of topics discussed in 1998.

But this is evidently not enough. I suppose that the objective development of the crisis will force us to come to more definite steps. First of all, limiting the amount of speculative operations will be essential. Probably some markets will have to face the introduction of new taxes (for example, so-called Tobin tax). This step has been discussed for a long time already. And it's really strange, that Sarkozy didn't announce this idea. Of course, he isn't a social democrat (and European social democrats often propose this measure). Nevertheless, this idea is very popular in Europe, so the chances of it being announced as an initiative of the EU countries are big.

I think that the reconstruction of the world financial system must also touch its central player, which actually substantiates the very system. I'm talking about the dollar. Objectively, the world is moving in the direction of the multi-currency international finance system. It's understandable, that the mechanisms of coming to it must be coordinated. Otherwise it will simply develop de facto. The trust in the USA as in an emissive center from global investors as well as from all the new independent power centers (such as China, Russia and Brazil) is on such a low level, that, I suppose, some substantial steps will be undertaken to convert payments for the supply of main goods into the euro, ruble or other currencies.

I'll repeat that this system will arise de facto. But it would be much more reasonable not to allow chaos in the very question and begin discussing measures we can take in the format of international negotiations. The world actually needs a "new Bretton Woods" – an analog of the conference which took place 65 years ago, – which would become a start for absolutely new world financial system. Basically, the topic of the future discussion is the USA bankruptcy in general – not just some problems of separate financial institutes of the country.

But until now it feels like the "new" financial system again appears from the USA dictation. A part of the US elites supposes they can keep their powers over the world for some more time that way.

So now it's all about intercepting the initiative.

The creditors to the USA could make more rigid demands in the existing situation. For example, they could demand pledging the assets of a real sector of the US economy as a security of American debts. The creditor nations should have long ago demanded the US government to give extra guarantees for given loans, as well as any bank has a right to demand extra guarantees for the credit given, in case debtor's holdings decrease in value. That kind of definition of the question would be absolutely legal. But acting alone in this situation would be stupid. Separate demands can be ignored easily. In this question creditor countries must join hands and act as a united front. That kind of initiative must be articulated by someone. Moreover, leading economies of the world must put a claim for definite quotas in the new financial system. We can't give a monopoly for the work of the money printing-press to a single state anymore.

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