Sweeping IMF measures.

The G-20 meeting did bear fruit. Allot of fruit. In fact, this meeting was more fruitful than many others in recent years.

I suspect there will be a follow up in the next few months. But, this is a good start--if there will be more to come. I suggest instead of more policies, after this announcement, there should be a monitoring meeting to address the effectiveness in the broad range of implementation.

See IMF press release here

Aside from the $250 bn in SDR to be injected. I for one thinks that global M), broad money, was way too insufficient in the first place. Anything that re-distributes that, is a fantastic thing for the world's poor and middle class.

Another good, but slightly weak new mandate, will be the economic surveillance of the IMF in regards to global finance.

The IMF can't do everything. But, this is what the IMF has been doing, in any event. Will they replace the role of ratings agencies, is another story. I doubt that they can, even if they wanted to. The private market, has a mind of its own in regards to the work THEY have to do--the IMF, unless it is going to be a global investment bank and manager, can't possibly be overall effective in this regard, over ratings agencies and other market related institutions responsible in this regard.

The other police points are somewhat general. There is no commitment on global financial regulation. The commitment to poorer countries, seems as if it would remain the same.

Other than that...good start.

$250 bn in SDR for the IMF!

IMF Press Release. This is a part of an overall $1.1 Trillion dollars, the FT reports.

The drawing rights, which is denominated by a basket of currencies compared to the US dollar, will be used immediately.

No word on exactly how it will directed into stimulus. But, I guess it will be on a case by case basis.

Trade finance is an issue as well as special developing country credit, is also an issue.

ECB Rate cut!

G-20 induced rate cut was called after the first meetings of the G-20 leaders.

Most likely they got on the phone and said to Trichet--Obama said cut that rate. Forget about your inflation targets. You won't have one unless America gets it's rate cut for the Euro-zone.

The report from the FT says that it was due to the recession (yea, yea, yea) and primarily, due to Germany's falling exports. Sounds a little fair about the exports. Sounds like EU domestic protection. If tariffs or NTB's (non tariff barriers) are raised, then we would have a full scale war on our hands--trade war.

I am one who feels that rate cuts, should go hand in hand with deflation at this time. And, not just rate cut for the sake of cutting a rate--but, quantitative easing, to ensure a boost in private stocks. If stocks aren't deflating, then the need to cut a rate comes down to access to money for the domestic market.

I guess this is what they meant by a "coordinated" response. Because, we can't have one major G-20, cutting rates right left and centre--but the other, not cutting rates, bulking up their currency and then, leaving the possibility for protectionism.

Protectionism is on the rise, as many authors have stated--Razeen Sally, being the chief one.

Where does this take us? We don't know. But, it is taking us somewhere. And, the moral of the story is, when the US comes to the EU, things, happen!

Snapshot of the problems....

Here from the ICTSD and their weekly publication, Bridges Trade Digest. See article here

Developing countries are being hit not only by declining growth and demand for their exports, but also by the sudden jump in the cost of trade finance, a drop in remittances, reduced foreign direct investment, and outflows of portfolio investment.

Good little reminder. No analytical publication is given. But, it seems a bit believable.

Sally and Erixon!

Razeen Sally is emerging as yet another leader in the global economic challenge. I applaud his efforts.

His approach is more international than that of Krugman or anyone else out there; except for Buiter and at some times, Rodrik.

Even though he comes from a trade (free-trade) approach, his outlook gives us some snapshot into how the new global governance should look like, surprisingly, from a goods and transfer aspect of things as opposed to the dollars and cents approach by Buiter. Or, the development aspect of a Rodrik.

He and Fredrik Erixon have collaborated on a few recent articles in regards to assisting the system to get back to health.

What he proposes is some what of a paradox:

Finally, the new consensus espouses a renewed compact of “embedded liberalism” or “Keynes at home and Smith abroad” (Caplin 2008). Greater government macro and micro interventions at home are needed to stimulate recovery, reduce inequality and preserve social stability. And stronger international cooperation (or “global governance”) is needed to make this work in tandem with open markets abroad. This idea is based on a contradiction. Big Government at home means a new Age of Protection abroad. Keynes at home is also Keynes abroad.

There may be more to the issue than just the paradox. Perhaps I would have to review the Caplin literature to understand what that would entail. But, from the face of it, it appears as if it is going to be littered with heavy government domestic spending, greater deficits and lots of spending to go with it.

I think there are some structuralist traditionalist economists, who would have issue with this.

Kamalesh Sharma speaks...

Caribbean Net News Commentary

I met Ambassador Sharma at an event I hosted at the LSE, "The One World: Ambassador Series" back in 2007 when he was the Indian Ambassador to the UK.

A very tall and intimidating figure. Very short and to the point. A little stuffy too, but, I guess we all can't be Mary Poppins.

I am surprised he made it to Commonwealth Secretary. Congrats on his appointment.

He is suggesting a T-20 (Trustee-20) rather than reliving the G-20. This T-20 will be the new trustee's of the global economy. Born out of the G-20 of course.

He made some other great points by the way. Culminating in this final statement of grandeur:

The lesson of 2009 must be the need for a renewed global resolve to meet these challenges in a way that benefits all. Our current reality is partial globalisation; our shared goal is inclusive globalism. A new multilateralism is an imperative, not an option.

Could not have said this any better myself.

BOE HEW report: Negative investment.

The BOE reports that Home Equity Withdrawal, HEW, is down at 2008 Q4 is -£8.0 billion.

This means that persons, who invested in their home, but did not have the value extracted from that investment to go to other market purchases non home related--school tuition; financial products or any other non home purchase or home development investment, was down.

This means that persons are losing considerable value on their homes. Compared to -£5.9 billion in 2008 Q3, this is a sharp increase of just about 35%.

Homes are being devalued and persons, are not spinning this equity into tangible market purchases and investments.



Sharp decreases over the last three quarters as well.