Thursday, October 23, 2008

A financial 'New World Order'

Nicolas Sarkozy, the French president, who currently holds the rotating post of EU president, is spearheading efforts to formulate a new financial world order to prevent a reoccurence of the current global financial crisis.

Sarkozy has outlined the EU's response to the stock market vacillations and bank collapses, calling for the implementation of a global system of regulation and a ban on banks with state money working through tax havens.

Next week, Sarkozy is due to visit Beijing and is expected to call on both China and India to join in efforts to work towards resolving and preventing more financial market turmoil.

Sarkozy and Jose Manuel Barroso, the European Commission president, said they would use an Asia-Europe Meeting (ASEM) to urge the two fast-growing export countries to join in taking responsibility for stabilising the world economy in the wake of the credit crisis.

At this point, China and India are reluctant as they cannot see many incentives to induce them to do so.

In this edition of Inside Story Erik Berglof, the chief economist and special adviser to the president at the European Bank for Reconstruction and Development; Iain Begg, a professor at the European Institute, London School of Economics; and Mohan Guruswamy, the chairman and founder of the Centre for Policy Alternatives will join the presenter Sohail Rahman.

A new Bretton Woods Agreement is the institutionalizing of the US Federal Reserve as the lender of last resort for NATO economies as well as a few others.


The lockup of credit is thawing according to Libor. Take a look at this article yesterday on what should be named "Lie"-bor.

"Fundamentally, the Europeans are not simply hoping to modernize Bretton Woods, but instead to Europeanize the American financial markets. This is ultimately not a financial question, but a political one. The French are trying to flip Bretton Woods from a system where the United States is the buttress of the international system to a situation where the United States remains the buttress but is more constrained by the broader international system. The European view is that this will help everybody. The American position is not yet framed and won̢۪t be until the new president is in office."

The United States, Europe and Bretton Woods II
October 20, 2008 | 2200 GMT
By George Friedman and Peter Zeihan

French President Nicolas Sarkozy and U.S. President George W. Bush met Oct. 18 to discuss the possibility of a global financial summit. The meeting ended with an American offer to host a global summit in December modeled on the 1944 Bretton Woods system that founded the modern economic system.

The Bretton Woods framework is one of the more misunderstood developments in human history. The conventional wisdom is that Bretton Woods crafted the modern international economic architecture, lashing the trading and currency systems to the gold standard to achieve global stability. To a certain degree, that is true. But the form that Bretton Woods took in the public mind is only a veneer. The real implications and meaning of Bretton Woods are a different story altogether.


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