G-20 Leaders gathering in London on 02 April represent 85% of the world's economy. At this meeting:
· The G-20 nations want to reach agreement on more co-ordinated action to revive the world economy, both through more interest rate cuts and more spending by governments to bring economies out of recession;
· Most of the G-20 countries will push for an action plan to prevent a future crisis by strengthening the international regulation of banks and other financial institutions;
· The Group also hopes to agree on a blueprint for future reform, including changes to the international organisations charged with regulating the world economy, such as the International Monetary Fund (IMF), to give a greater clout to poorer countries.
USA is on board with interest rate cuts and more spending by governments, but it is not articulating its views very clearly on reform of international financial architecture. And, on regulation of financial institutions, the US, if anything, is reluctant to appear to be strong proponent of stricter regulatory measures. US’s view on this issue has been at best muffled and confusing.
A report from the G20 working group on regulation has been reportedly leaked to the financial website breakingviews.com. Key recommendations include the strengthening of capital requirements, greater transparency, and more International Monetary Fund (IMF) oversight of systemic risks. It is said that the recommendations closely follow proposed reform of the UK's regulation.
This is where the problem is: A country which has itself made a mess of its economic management is trying to propose changes. The country is question is America’s lackey – Britain. Britain’s banks are in pathetic condition, the top ones needed the government to dole them out of trouble. Britain’s housing mortgage almost mimicked the disastrous American model.
Despite all this the wily schmuck British are trying to pre-empt other countries by drafting some document and throwing it out there. The Brits, whose international stature these days depends on the crumbs thrown their way by their patrons in Washington, generally try to propose something that pleases their American masters.
In case of the current economic mess the countries that have the legitimate credentials to offer changes regarding economic world order, regulation of financial systems are essentially two – Canada and India. The reasons are almost obvious to anybody who is non-partisan, unprejudiced and has some idea of international financial system.
Among the G-7 countries Canada’s banking system is the least affected by current economic turmoil. The financial regulatory framework in Canada seems to have acquitted itself fairly well. The Bank of Canada is presiding over the overall Canadian financial institutions in a reasonably competent manner – its Governor Mike Carney taking necessary steps to provide CPR to the Canadian economy. He also seems to be clued to the stimulus measures being rolled out by the Harper government.
Among developing economies, India has the best credentials, from various standpoints, to offer a suitable blueprint on regulatory framework as well as new economic world order. First, India has the 5th highest GDP (based on PPP) in the world (after US, China, Japan & Germany). India’s central bank has been implementing and managing necessary regulatory framework for the financial institutions in India in a very successful and effective manner for years.
When Asia Pacific countries reeled under currency meltdown in the 90’s, India remained unscathed simply because India’s central bank already had in place effective tools and regulatory structure to prevent any such disaster. India’s economy is predicated on one of the most sensible models – an economy which is around 60% based on internal consumption and rest on export. The Indian economic honchos have displayed a far greater sense of foresight and understanding than their peers in US, Germany, Britain, Japan and other G-20 countries.
USA has no moral or ethical standing to pontificate about new economic world order (including IMF, World Bank) and/or regulatory framework for financial institutions. The current economic global crisis has been engendered by diabolical mutilation of ethical dealings unleashed by the shameless greedy SOB’s of American financial institutions.
These shameless rogues of the US financial system seem incorrigible – they have the audacity to thumb their noses to present administration. The American public and the President et al were dealt with a resounding slap when the AIG executives pocketed bonuses in the excess of $200 Million – and horror of horrors, this amount coming out of government alms! Who knows what stratagems the other US banks and financial institutions are planning to bilk away huge bonus packets for themselves?
Of the other G-7 nations, Germany also seems to be floundering. Therefore, it is also not in the best position to lead any initiative for the required change. China doesn’t make a good candidate for being a leader of change because China’s regulatory framework is not backed by the checks and balances that a democratic country like India has. Brazil is still learning the ropes, and so are the other developing countries of the G-20 club.
In recent G-20 conclaves USA has been urging focus mainly on stimulus, and kind of downplaying need for expeditious action on changes in economic world order and regulation. It is a sad commentary of American intellectual level. A country which boasts of a string of Nobel Laureates in Economics is right now struggling to stay afloat and get back on track!
American budget deficits are turning cavernous by the week; Treasury Secretary Geithner is under pressure. He received implicit support though from his President in March but it will not be easy for him to grapple and subdue the gargantuan economic mess that engulfs the US. Moreover, the highly partisan skulduggery at the Capitol Hill tends to significantly weaken any policy initiative emanating from the White House.
So, in summary the G-20 meeting in April will be best served if Canada and India are given more leeway and opportunity to shape the economic framework of the future. If the US is allowed by the G-18 to ride roughshod over the sensible policy directions, and if their lackeys – the bootlicking schmuck Brits – get a freehand in drafting the policy directions, then God bless the world!
It is time the 18 countries of the G-20 club told the US and its poodle (Britain) to move over to the sidelines and let the more knowledgeable practitioners to fashion the economic future of the world. However, the US and Britain may offer meaningful suggestions, if they can. But if they resorted to dog-in-the-manger policy it will do no good to the current crisis, and it is the US which stands to lose maximum if the world economy goes in a deeper hole rather than come out it. President Obama and Gordon Brown would do well to lend their ears more rather than their tongues!
Showing posts with label Tim Geithner. Show all posts
Showing posts with label Tim Geithner. Show all posts
Sunday, March 22, 2009
Sunday, February 1, 2009
PRESIDENT OBAMA’S VISIT TO CANADA – SOME CRITICAL BILATERAL ISSUES NEED TO BE HANDLED CAREFULLY BY BOTH SIDES!
President Obama, reverting to the tradition of newly elected US presidents, will be visiting Canada on his first overseas trip. This trip, dubbed essentially a working visit, will have to grapple with some tricky issues which are bound to be on the table.
One of them is the controversial provision that President Obama’s US$800+ billion economic stimulus plan is proposed to contain. The proposed legislation aims to ban foreign iron and steel used in any building project undertaken under the massive stimulus plan - which could potentially cut out a major portion of the Canadian steel industry's $7 billion in annual exports.
If this provision got implemented to the letter it would be severely detrimental for Canada, so Canada is rightly worried. It should be, it is a serious matter coming as it does when the economy is already in recession. Canada views the proposed legislation, and correctly so, as a protectionist measure on part of US.
It was heartening to see that Canada is being proactive in this matter rather than fume and fret. International Trade Minister Stockwell Day did well to speak with US Trade Representative Peter Allgeier at the economic forum in Davos, Switzerland which ended on Feb 1. Later Day told reporters that he was cautiously optimistic that something could be worked out.
Canada has also conveyed to US that this type of protectionism is exactly what helped push the Great Depression forward at the start of the 1930s. On a parallel track Canadian PM Harper said in Ottawa that such measures would see the U.S. renege on its "international obligations" to eliminate barriers to worldwide trade.
It is a good positive strategy. The message has reached US prior to Obama’s planned visit on Feb 19 – that Canada would like this issue to be resolved to mutual benefit. US acknowledged that it had got Canada’s message. US White House Press Secretary Robert Gibbs said on 30th Jan "the administration is reviewing that provision" and acknowledged the concerns on both sides of the U.S.-Canada border.
Another important matter that would need to be discussed and mutually beneficial path forward identified relates to oilsands fronted crude/bitumen supply to US. Oilsands has attracted lot of attention, of late, from environmentalists. As well, President Obama places great importance on protection of environment. But at the same time Canada is the largest supplier of crude to US – crude both from conventional and non-conventional sources. This pitches tarsands in a dichotomous situation.
Other issues that are likely to form part of the conversation between Obama and Harper are: war against terror – Canada’s role in Afghanistan, NAFTA, ailing auto sector, claims to Arctic assets and security of passage to that area, cross-border security, intelligence sharing, global economic reform.
President Obama is obviously briefed on the importance of US-Canada ties – ranging from NORAD to crude oil. Obama’s economic team led by Treasury Secretary Timothy Geithner is putting together US economic recovery package which is expected to be finalised by middle of February. This timeline adds urgency regarding what assumptions the package is going to be predicated on.
If Geithner et al base their package including some protectionist premise (like, the one relating to steel), that certainly will not portend well for both US and Canada. Or, will there be some selective waiver for friends (Canada), or, the package will prefer not to mention such contentious premises at all?
Obama and Geithner would do well to be aware that a very diverse group of leading economists of all ideological stripes met at a preparatory conference for Davos in Dubai in November 2008. The group said in a formal statement that one of their chief tasks is "advocating against the deregulation backlash." An update right before Davos by this same group stressed the importance of "openness to trade" and "competitive markets."
Both Obama and Harper should be cognizant of what someone said in Davos about the economic downward tailspin that we are in: “I tell you we have not turned the corner, we can't see the corner, we don't even know where the corner is." In such a situation creating new protectionist walls, or getting in to some kind of head-butting will be damaging for either parties.
It is, therefore, imperative that US and Canada handle the bilateral issues carefully and with sensitiveness. Political rhetoric sound good from the podiums placed in political rallies but if they are carried to the policy making blueprint without evaluating the various pros and cons, that is opposite of everything that embodies the word ‘prudence’.
In cooperation with Canada there is so much to be gained for US – towards its goal of gaining independence from crude imports from ‘hostile regimes’, war on terror, joint US-Canada defence partnerships and so on. Canada has already offered a bi-nation energy agreement, and also proffered to participate in environment related joint-action plan. Canada is aware of what needs to be done to make tarsands industry more environment friendly, and actions are already being implemented in that direction.
Finally, the current economic crisis is one such which can be ridden out of only through collaborative, combined effort – on a global basis. Such efforts will be rendered severely ineffective if countries resort to raising trade walls. President Obama has mentioned on a number of occasions that US will ‘lead’ again. Surely, raising protectionist measures (e.g., use of US steel only for US projects) will not raise the US to the moral high ground that it seeks to regain in post-Bush era.
One of them is the controversial provision that President Obama’s US$800+ billion economic stimulus plan is proposed to contain. The proposed legislation aims to ban foreign iron and steel used in any building project undertaken under the massive stimulus plan - which could potentially cut out a major portion of the Canadian steel industry's $7 billion in annual exports.
If this provision got implemented to the letter it would be severely detrimental for Canada, so Canada is rightly worried. It should be, it is a serious matter coming as it does when the economy is already in recession. Canada views the proposed legislation, and correctly so, as a protectionist measure on part of US.
It was heartening to see that Canada is being proactive in this matter rather than fume and fret. International Trade Minister Stockwell Day did well to speak with US Trade Representative Peter Allgeier at the economic forum in Davos, Switzerland which ended on Feb 1. Later Day told reporters that he was cautiously optimistic that something could be worked out.
Canada has also conveyed to US that this type of protectionism is exactly what helped push the Great Depression forward at the start of the 1930s. On a parallel track Canadian PM Harper said in Ottawa that such measures would see the U.S. renege on its "international obligations" to eliminate barriers to worldwide trade.
It is a good positive strategy. The message has reached US prior to Obama’s planned visit on Feb 19 – that Canada would like this issue to be resolved to mutual benefit. US acknowledged that it had got Canada’s message. US White House Press Secretary Robert Gibbs said on 30th Jan "the administration is reviewing that provision" and acknowledged the concerns on both sides of the U.S.-Canada border.
Another important matter that would need to be discussed and mutually beneficial path forward identified relates to oilsands fronted crude/bitumen supply to US. Oilsands has attracted lot of attention, of late, from environmentalists. As well, President Obama places great importance on protection of environment. But at the same time Canada is the largest supplier of crude to US – crude both from conventional and non-conventional sources. This pitches tarsands in a dichotomous situation.
Other issues that are likely to form part of the conversation between Obama and Harper are: war against terror – Canada’s role in Afghanistan, NAFTA, ailing auto sector, claims to Arctic assets and security of passage to that area, cross-border security, intelligence sharing, global economic reform.
President Obama is obviously briefed on the importance of US-Canada ties – ranging from NORAD to crude oil. Obama’s economic team led by Treasury Secretary Timothy Geithner is putting together US economic recovery package which is expected to be finalised by middle of February. This timeline adds urgency regarding what assumptions the package is going to be predicated on.
If Geithner et al base their package including some protectionist premise (like, the one relating to steel), that certainly will not portend well for both US and Canada. Or, will there be some selective waiver for friends (Canada), or, the package will prefer not to mention such contentious premises at all?
Obama and Geithner would do well to be aware that a very diverse group of leading economists of all ideological stripes met at a preparatory conference for Davos in Dubai in November 2008. The group said in a formal statement that one of their chief tasks is "advocating against the deregulation backlash." An update right before Davos by this same group stressed the importance of "openness to trade" and "competitive markets."
Both Obama and Harper should be cognizant of what someone said in Davos about the economic downward tailspin that we are in: “I tell you we have not turned the corner, we can't see the corner, we don't even know where the corner is." In such a situation creating new protectionist walls, or getting in to some kind of head-butting will be damaging for either parties.
It is, therefore, imperative that US and Canada handle the bilateral issues carefully and with sensitiveness. Political rhetoric sound good from the podiums placed in political rallies but if they are carried to the policy making blueprint without evaluating the various pros and cons, that is opposite of everything that embodies the word ‘prudence’.
In cooperation with Canada there is so much to be gained for US – towards its goal of gaining independence from crude imports from ‘hostile regimes’, war on terror, joint US-Canada defence partnerships and so on. Canada has already offered a bi-nation energy agreement, and also proffered to participate in environment related joint-action plan. Canada is aware of what needs to be done to make tarsands industry more environment friendly, and actions are already being implemented in that direction.
Finally, the current economic crisis is one such which can be ridden out of only through collaborative, combined effort – on a global basis. Such efforts will be rendered severely ineffective if countries resort to raising trade walls. President Obama has mentioned on a number of occasions that US will ‘lead’ again. Surely, raising protectionist measures (e.g., use of US steel only for US projects) will not raise the US to the moral high ground that it seeks to regain in post-Bush era.
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