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Deika Morrison

Deika Morrison: Reasoning the Reasons

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Deika Morrison: Financial Security Tips+Tools

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Saturday, October 11, 2008

Why the G20 matters


From the website "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."

Are they Important? Can they agree?

Absolutely on both counts!
  • The emerging markets are major creditors. They are major savers. However forgiving all loans and giving away all savings to the G7 is respectfully, not solving the problem. So if that is what the G7 and the world expects, that is an unrealistic expectation. Interesting read here.
  • The emerging markets have the majority of the world's population to buy goods and services. They have a vested interest in global growth and affordable goods and services. A global depression, recession or contraction is not in their interests. High cost of credit is not in their interests.
  • All members, especially the emerging markets, have a vested interest in some urgent action on the ratings agencies to encouraging them to be more constructive (to be diplomatic). Downgrades after downgrades in an period of severally obscured information is completely counter-productive for national psyche, investor confidence, stability and global economic recovery.
  • Many emerging markets are fully aware of the social and economic price of IMF support. "Structural adjustment" is painful and has not been overly successful (to be diplomatic). Many countries now have the ability to intervene for the weaker countries that may have to depend on that support. More constructive terms and conditions are in everyone's interest - let us not create more problems and more dependency when there is a liquidity and a credit crisis. Respectfully, if not structured properly, this IMF support has real potential to be financially induced genocide for some countries because they cannot access funds normally, they cannot access aid because the aid sources have dried up, and in their haste and desperation to access funds for survival they are left with no options but to take the terms and conditions that they are presented with which have historically produced real and significant negative social and economic consequences.
  • Some of these countries have been in these situations before, or worse. From experience, they can provide real suggestions for solutions - not only for the financial architecture, but also to buffer the impact on the real economy and people.
Acting constructively together, they can change the whole financial architecture to make it more equitable, now that the traditional dominant voices cannot wield the stick they used to which was threats to cut off aid and cut off access to private capital markets.

This is a most pivotal moment if used constructively.

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Reasoning The Reasons by Deika Morrison is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.