The intimation of G8′s impending demise came from the host of the summit, Italian President Silvio Berlusconi. “We saw that G8 is no longer a suitable format to show a global economic way of doing. Instead, a consolidated G14 representing 80% of the world economy could help create a real dialogue. We want to see if the G14 is the best solution for debates which will bring to us unique results.”
Berlusconi was merely echoing the creeping realisation among the G8 countries that the steady decline of the developed nations, coupled with the rapid rise of developing countries like India and China, had rendered the rich club irrelevant. (via G8 is dead, long live G14 – Europe – World – NEWS – The Times of India).
On 5th November 2008, Raghuram Raman was appointed as by the GOI as advisor to the Indian PM – to advise the Indian PM about the forth coming G-20 meetings. As ex-IMF man, if he is the ‘expert’ that he is touted as, by this time Raghuram Rajan should know that the IMF and World Bank are international only in name. They are Western Clubs – meant for the benefit of the West.
All G20 members were ‘invited’ to join another Western Club – the FSF. The Financial Stability Forum, another club, with the same G7 members. Just why does India join these rubber stamp bodies – and lend sanctity to the exploitative agenda of the sponsors. Does the world need another body, with the same Central Bank members, addressing the same monetary issues problems, with the same agenda?
G7 and OECD countries have created a club for themselves, by giving each other unlimited line of credit – while the developing world gets credit based on fast-depreciating dollar/euro foreign exchange reserves. Maybe this needs an inversion. The OECD and G7 should be asked to pay their purchases. In a new global reserve currency. And the BRICS need to start working on that.
Many of the regulatory bodies are actually a US-Euro Clubs – to fool the world, with token actions and steps to demonstrate inclusion and fairness of the developing world.
My feeling …
The BRIC leaders know well enough that the West will not let go of the IMF and the UN. The charade of UN /IMF /World Bank Reform is possibly required – and they are going through it.
Between ASEAN and IBSA, India needs to take Third World groupings from talk-fests to action-teams. Western clubs like UN, IMF, World Bank, G-7, P-5, etc are all heavily weighted against ‘outsiders’ like developing nations.
Join the gang
Thanks for the offer, but no thanks. And I will tell you why!
Trying to clean these Augean sales is a waste. India should engage with the BRICS countries – and focus on creating another institution without the West to start with.
Safe, Steady and Sure
We can keep banging our head against these Western altars, for another 60 years. It won’t work. We need to move – not necessarily fast, but surely and steadily. The Developing World (and India) can continue to knock at the doors of these Western clubs – and yet why would the West dilute their power and influence? And allow the Rest to take advantage of structures that the West has created for its own benefit?
What is on the table
France, Germany Canada and Australia (not in G7) and Italy are tethering on the brink – under the weight of their social security system, and most of their business in the public sector. A geriatric Japan is dependent almost entirely on these declining seven. Japan’s investment in India and China has been negligible.
What Do We Bring To The Table
India, China and South Africa on the other hand, bring growing economies, young populations, lower welfare state burdens, expanding industrial base – and above all, a record of non-aggressive history.
These dubious clubs depend on victims to approve and finance their own slaughter – and these memberships don’t appeal to India.
G7, you are welcome to join us at our terms. We dont want to be a part of your ‘blood soaked history.’
- Lessons of History (behind2ndlook.wordpress.com)
- ‘Helicopter Ben’ May Deter Lending With Lower Rates, Gross Says (businessweek.com)
- Banks snap up €500bn in loans from European Central Bank (guardian.co.uk)
- Trend Alert: Frothy Frocks (fabsugar.com)
- ECB loans highlight funding pressure on eurozone banks (guardian.co.uk)
- Fed battling economic forces beyond its control (bottomline.msnbc.msn.com)
- Fed meeting is focusing on plan to forecast rates (seattletimes.nwsource.com)
- DeMark Says S&P 500 Climbing to Oct. 27 Peak Is ‘Critical’ (businessweek.com)
- It’s time for economic theory to evolve (finance.fortune.cnn.com)
- Ron Paul’s monetary madness infects the GOP (seattletimes.nwsource.com)
As I noted on this page in December 2007, the presumptive cause of the world-wide decline in long-term rates was the tectonic shift in the early 1990s by much of the developing world from heavy emphasis on central planning to increasingly dynamic, export-led market competition. The result was a surge in growth in China and a large number of other emerging market economies that led to an excess of global intended savings relative to intended capital investment. That ex ante excess of savings propelled global long-term interest rates progressively lower between early 2000 and 2005. (via Alan Greenspan Says the Federal Reserve Didn’t Cause the Housing Bubble – WSJ.com).
I can see the Nobel prize slipping away …
Poor Al! He can see it slipping away from him. What cane he do? Blaming the Asians is good start point. He is not below using Ben Bernanke’s rubbish to save his sagging hide.
What does this mean
An Indian economist explained this rather well. Suman Bery, writing for a direction towards Toward a robust globalisation, explained,
In a famous speech exactly four years ago, Fed Chairman Bernanke represented the US as responding passively and benignly to the global “savings glut” which had developed following the East Asian crisis of 1997-98.
Even though most closely associated with Chairman Bernanke, this formulation is widely shared by respectable economists and commentators, such as Martin Wolf of the Financial Times, Professor Richard Portes of the London Business School and the Centre for Economic Policy Research, and Professor Max Corden of the University of Melbourne. The task of recycling these imbalances fell on the sophisticated financial systems of the advanced countries. In the event, for a variety of reasons, even they proved unequal to the burden placed upon them.
Thus Spake Ben Bernanke
Remarks by Governor Ben S. Bernanke, Before the National Economists Club, Washington, D.C. November 21, 2002 (ellipsis mine)
U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press … that allows it to produce as many U.S. dollars as it wishes at essentially no cost. … …the Fed could find other ways of injecting money into the system–for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities … If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.
A terse anouncement by the Federal Reserve Board said,
“On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate. The Board will also cease publishing the following components: large-denomination time deposits, repurchase agreements (RPs), and Eurodollars. The Board will continue to publish institutional money market mutual funds as a memorandum item in this release.
On November 10, 2006 Ben Bernanke justified,
“As I have already suggested, the rapid pace of financial innovation in the United States has been an important reason for the instability of the relationships between monetary aggregates and other macroeconomic variables.”
Ben Bernanke has given ample (and more) indications about what he will do. In fact, more than indications, he was brazen enough to say, what exactly he would do! How can the world blame him now?
The Asian ‘savings glut’ was the problem …
a satisfying explanation of the recent upward climb of the U.S. current account deficit requires a global perspective that more fully takes into account events outside the United States. To be more specific, I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving–a global saving glut–which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today.
After Ben Bernanke opened the flood gates of such logic with ‘helicopter drop of dollars’ and ‘printing press technology’, and now the ‘savings glut’ – others such ‘economists’ have rushed in to do another tom-tom dance around this logic.
What’s the word for a red neck economist?
A so called economist, weighed in with two bits, Dani Rodrik: Who killed Wall Street?
…the true culprits lie halfway around the world. High-saving Asian households and dollar-hoarding foreign central banks produced a global savings “glut,” which pushed real interest rates into negative territory, in turn stoking the US housing bubble while sending financiers on ever-riskier ventures with borrowed money. Macroeconomic policymakers could have gotten their act together and acted in time to unwind those large and unsustainable current-account imbalances. Then there would not have been so much liquidity sloshing around waiting for an accident to happen.
The Real Culprits …
Dani Rodrik does not mentioned Ben Bernanke even once. Bernanke’s printing press and helicopter’s are not mentioned even once. The evasion of Federal Reserve on M3 figures are not mentioned even once.
China which has funded the US to the extenet of US$2 trillion is not even mentioned once. Japan which has funded the US to the extent of US$1 trillion is ignored.
Alan Greenspan is mentioned once.
But Asians countries whose reserves are getting wiped due to dollar depreciation – are instead mentioned as culprits.
Wow. This is a new level in brazen-ness. Keep it up Ben, Al – and not forget you, Dani boy.
Let us see .. what this means …
Lawrence Summers (correctly) described the current global financial system as a “balance of financial terror”. Lawrence Summers could not have been more clear than this. In a speech on March 23, 2004, at the Institute for International Economics, Lawrence Summers described the US strategy. Again on March 24, 2006, at the Reserve Bank of India lecture, he repeated his message.
In the last 5 years, more than US$10 trillion were printed and the world is awash with dollars. Where did this money go? How was this used?
“Lendings by US commercial banks in the period 2000 to 2004 soared by altogether USD 1,500bn to USD 6,750bn. In the European Monetary Union lending to the private sector by monetary financial institutions (MFI) climbed from roughly EUR 6,200bn end-1999 to not quite EUR 8,700bn at the end of last year.” - Allianz Report, Dresdner Bank.(Links mine)
The loans story does not end there.
These loans were in turn sold and re-sold, then packaged and mortgaged, derived and contrived - finally ballooning into the ‘sub-prime’ crisis. Are these welfare payouts by another name? Who will pay for this “lending”? US Consumers are not repaying their housing loans.
Some one has to!
And that is the root of the problem. The West is trying to make Asians pay!! And people like Ben Bernanke, Alan Greenspan et al are paid hacks to create a logic by which the West will try and make the poor pay.
“U S Federal Reserve chairman Ben Bernanke’s helicopter has been sighted for the first time in emerging markets, raining dollars in South Korea, Mexico, Brazil and Singapore. The currency swap lines of $30 billion (Rs1.5 trillion) arranged by the Fed for each of these markets led to a drop in dollar borrowing costs in Asia on Thursday, strengthened Asian currencies (the Korean won was up 14% against the dollar) and, together with the cut in the fed funds rate, led to a polevault in stocks in the region.
The global dollar shortage has played havoc with emerging market currencies, which have been plummeting.”
Don’t Ask … Demand
It is more like US responsibility …
The US has been evading transparency by not revealing M3 figures (on dubious grounds), printing money 24x7x365 and creating toxic assets. Now when the muck has hit the fan, they are acting coy.
China was right that the US is now looking after its own – and not bothered about the problems the US has created for other countries. Like this news article shows, India is unlikely to get seriously affected – which is possibly creating complacency in India about what needs to be done.
The 2ndlook model for a Third currency Bloc is ready. Join in to review, participate, critique and develop the First Cut. While the need for a new global reserve currency has been evident, there is very little in the public sphere. The speed of events has clearly caught the BRICS and Third World napping – and unprepared. But, not 2ndlook – who, from the very beginning, proposed that the world should stop clinging to the Dollar-Euro skirts.