G20 Communique

From the London Summit:

The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs, to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale…

Emerging markets and developing countries, which have been the engine of recent world growth, are also now facing challenges which are adding to the current downturn in the global economy. It is imperative for global confidence and economic recovery that capital continues to flow to them. This will require a substantial strengthening of the international financial institutions, particularly the IMF. We have therefore agreed today to make available an additional $850 billion of resources through the global financial institutions to support growth in emerging market and developing countries by helping to finance counter-cyclical spending, bank recapitalisation, infrastructure, trade finance, balance of payments support, debt rollover, and social support.

From Simon Johnson at The Baseline Scenario:

President Obama had just the right tone yesterday. Admittedly, he was helped by the fact that we no longer have anything to be arrogant about, but still the way he reached out to other countries – while also pointing out that they made big mistakes and are currently in trouble – conveyed exactly the right message. The US will do much better if it lets emerging markets and developing countries have a serious and permanent place at the big table.

From commenter, HB:

The IMF was Atlantic-centric: the US and Europe controlled it. This was a relic of the post-WWII order, before Asia emerged as an economic powerhouse. This lack of representation for Asian countries made them less willing to come to the IMF, especially after the Asian Crisis of 1997, when the IMF imposed harsh terms on many of the bailouts. The lesson many Asian countries – particularly China- learned from the 1997 crisis was to build up enough foreign currency reserves so that they would never have to go to hat in hand to the IMF for help. This contributed to the massive cash and trade imbalances that helped fuel the credit bubble that just popped.

From Simon Johnson at the NYT:

The managing director of the I.M.F. is very powerful, with a great deal of authority and discretion, and has always been a European — in effect, appointed by European governments to represent their interests. The G-20 made it clear that this will stop — the communiqué says the selection process will be open, transparent and competitive. But really this is code for saying they will pick someone from an emerging-market country, such as India or Brazil (and there are some excellent candidates). The right person in this job could have a huge positive effect on the I.M.F.’s legitimacy…

How did the Obama administration pull this off? In a brilliant move, they took the lead by volunteering to open up the selection process for the World Bank, the I.M.F.’s sister organization, which has always been run by an American. The next president of the World Bank is very likely to be Chinese.

From Ghulam Muhammed in the comments:

In London, between pomp and pageantry and a symbolic anti-capitalist protest rally chocking city center, Gordon Brown took pride in reeling of figures – all in trillion and billions, none in millions, to pump more credit into a system that has ruthlessly exploited America’s dollar as reserve currency and America’s financial markets as treasurers to the world, and inflicted a grand ponzi scheme on the world, with full impunity. The same thieves are in business and no amount of oversight can take away their inbuilt, ingrained ability and motivation to build up mountains of leveraged products just to remain in business.

From the CFR:

The US though can only do its part if Congress authorizes a bigger US contribution to the IMF’s backstop credit line. It should. A world where many emerging economies cannot borrow is also a world where many emerging economies cannot buy US goods. And a world where Eastern Europe falls into a deep, deep crisis less than twenty years after the end of the cold war wouldn’t exactly be a victory for US foreign policy either …