Image by zongo69 via FlickrLet's give credit where credit is due. The G20 met and agreed. The alternative - not meeting, or meeting and not agreeing - is too horrible to contemplate. So let's give thanks for what we have.
Surprisingly, they have said a lot. Really, I've had some experience with communiques and they are usually very vague because its the only way to get all the countries to agree. And how much is a lot? Well, 1 statement and 2 appendices with details. Shocker! Here are the links and they are well worth reading. And if you have followed this for years like me, some of this stuff will make your eyes open very wide because I never thought I'd see this day. So:
All in all, a good start. Seriously. Lots of recognition of problems, lots of promises of things to be done, some specificity, commitments to fight poverty, create and save jobs etc. Sounds - I repeat, sounds - perfect. BUT, see that image of the standoff. Let's not think we have now magically gotten order from the disorder. Evidently they "know" and that's a lot. But the test is really the collective "will". Because nothing has actually happened yet other than the agreement. People have to do things now - things have to happen, money has to flow, rules have to be made and enforced. We needed the agreement ages ago; and now that we have it, we need the action eons before that. There is no time to waste!
What's the bottom line?
- The IMF gets a ton of money to try to save the world. Other institutions too but the IMF gets the bulk of it. Question though? Access, access, access? Terms and conditions? The terms and conditions contributed to this mess and can contribute to instability. The IMF is famous for "structural adjustment" which you might as well call "social pain". Social pain right now is NOT helpful. Unemployment is rising, incomes are falling and savings are lost. People do not need to be "adjusted" right about now. So this money can be really helpful, only if it can be accessed and it is made available in a way that helps.
- If the financial sector was a wild animal, the leaders want it tamed. So countries have "agreed" to lots of sweeping measures - oversight for credit ratings agencies (that alone can save the world if done properly), supervision for some - yes, unfortunately some - hedge funds, restrictions for tax havens, accounting reform, a body that warns us if this is going to happen again, measures for executive compensation.....read the separate declaration because it's pretty good "whats". You know where this can all fall down - HOW? Yes, how do you enforce these things? And yes, how do you prevent domestic legislation for overruling or ignoring this - please note the US Congress relaxed mark to market accounting the DAY these lovely agreements were released? And yes, how do you ensure that the intent of all these measures results in a functional financial system? Because frankly, there are easier ways - people may not like them but banking will work again. I have already noted a number of qualifying statements which are just big loopholes if you ask me. But as I said, getting 20 countries to agree does require some vagueness. Leaders should be reminded that whatever they say and agree to, the genius and will of the "engineers" must never be underestimated. They will engineer ways around whatever they do not want to do and they are not concerned with the matters that keep world leaders up at night like avoiding social unrest, preventing poverty etc. So, I take these documents as good intentions on the parts of leaders. And I wait in breathless anticipation for the details. And I hope that people are really realistic in making up those details, and that domestic legislatures are supportive of the intentions that their leaders have committed to. This is NOT a political football - the financial system must work, or we - the whole world - are in big trouble.