Friday, November 14, 2008

A new Bretton Woods?

The grand bargain that opens between members of the G-20 on reforming the global financial system and ways to curb the effects of the global economic crisis and affects not only economic measures: it has become, as was expected , In a huge gamble in which geopolitical power relations among nations should determine the future solutions. Since starting the crisis, the French government, which is currently chairing the European Council, made it clear he wanted a strategy that fell short of what is at stake. It has proposed that melts in the new international system of the left hand of God from the agreements of Jamaica in 1975. It was apparently seek to return to the spirit of the Bretton Woods agreements, adopted in 1944, and more specifically to the need for regulation of the financial system.

The real objective of the G-20 is to determine the conditions of world aid to the U.S. economy

France proposes to organize "a coordinated response at the international level," but without actually specifying what the objectives and instruments of such coordination. The responses of the United Kingdom and Germany have been rather discreet. In Britain the Tories have never liked the regulation, and labor parties have become long on the economy of the free world. Germany shares more or less the same position, but from now wants stricter control of the funds in its sovereign territory. But France is in Washington with the advantage of receiving the support of most European countries.

In the current state of things, the G-20 want to agree on an approach of minimum reforms. Among Europeans there is a consensus around some emergency measures: making the IMF a body to monitor global financial stability that will lead from now on the Financial Stability Forum, would work directly with the Bank of International Regulations and the Basel Committee and Located in the center of an information system of monitoring bodies, would be responsible for raising the alarm in case of threat of crisis. It could also make recommendations to the States and even carry out programs for the financial sectors of member States, which was strictly forbidden until now. Finally, the Europeans also want the summit would set guidelines on immediate global governance, notably by creating a much tighter control over the agencies of notation, imposing rules and prudential, and monitor the compensation of financial players.

These measures are certainly necessary, but are far from being at the height of the crisis. And that's why a new meeting is scheduled in Paris in February 2009. For what? This is the real problem.

In fact, there are currently no substantive agreement on an international level on the objectives of a new world economic order. The reason is that Bretton Woods was based primarily on two essential foundations: the control of the flow of capital and the creation of a global mechanism of parity, linking the dollar, recognized currency of global exchange, with the gold standard. However, controlling the movement of capital goes far beyond the simple implementation of stabilizers cyclical, as proposed by some states (the United Kingdom, China). Even today it is very likely to be unachievable, unless an agreement is reached to use massively, within the IMF special drawing rights as an incentive for a relaunch of the world economy. But U.S., which holds 17% of the voting rights at the heart of this body, ie a blocking minority, has always opposed (less than once) to use them. Then, create a new mechanism of parity with the fluctuation of the dollar means that are reorganized monetary relations with the U.S., especially if we share the prophecy of Peter Steinbrück, the German Minister of Finance, which declared in September 2008 before the Bundestag: "This crisis means the end of American financial hegemony in the next 10 years."

In the meantime, the real objective of the meeting in Washington as it is to continue to determine the conditions under which produce world aid, particularly from China, Japan, Gulf countries and Germany, in re - the U.S. economy, a condition sine qua non for ending the crisis. The problem is knowing the price of this assistance. The battle of the new world economic and monetary order has only just begun.

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