G.O.O.D

Source: russiatoday.com

Until a couple of months ago, some economists argued Russia’s robust growth of recent years had effectively “decoupled” it from a direct correlation with the US economy. While the financial crisis proves the theory wrong, the Russian government is insisting on a new world order.

As world leaders try to deal with the biggest financial crisis since the Great Depression, President Dmitry Medvedev is echoing his French and British counterparts in calling for far reaching changes to the world financial system.

“We will need a new international agreement. The financial system must have common sources, which implies a multiplicity of world financial centres and reserve currencies. We need to form a new risk-management system,which would be based on new techniques, not the principles that the Bretton Woods agreement was based on,” Medvedev said.

Named after the 1944 meeting in the New Hampshire town of the same name, the Bretton Woods agreement led to the creation of the International Monetary Fund and the World Bank.

Developed countries agreed to stick to a fixed exchange rate for their currencies, pegged to gold.

In the 70s, the Nixon administration unilaterally untied the dollar from gold, making the dollar itself a reserve currency.

Now Medvedev is essentially calling for a lowered dependence on the dollar, according to experts. They say it would reduce U.S. influence on the world economy.

Yaroslav Lissovolik, Chief Economist from Deutsche Bank, says:

“Clearly, there is a lack of capital in the West and excess capital and a lot of savings in the East. And one of the ways in which the world economy could adapt quickly to the current conditions would be to allow for a free flow of resources from the East to the West.”

While the need to overhaul the global financial system seems obvious, what order might replace it remains unclear.

The world will be watching the G-20 meeting in Washington in mid-November, which will be the first to bring together the developed and the developing nations, for the answers.

Technorati Tags: Bretton Woods

Source: Reuters

Governments across the world launched multi-billion dollar bailouts on Monday to shore up tottering global banks and Britain called for a new Bretton Woods agreement to reshape the world financial system.

The slew of bank bailouts worth hundreds of billions of dollars were designed to stave off the world’s worst financial crisis in nearly 80 years, accompanied by declining global economic growth and the threat of widespread recession.

“Only by global action can we fully restore the confidence that is needed and build the international financial order,” said British Prime Minister Gordon Brown.

He called on world leaders to create a new “financial architecture” to reflect the global reach of economics and banking, in much the same way that the current international economic system was set up at a conference in Bretton Woods, New Hampshire, in 1944.

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Source: Bloomberg.com: Worldwide

Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”

“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”

The Dow Jones Industrial Average fell as much 8.1 percent in early trading and pared most of those losses after Berlusconi’s remarks. The Dow was down 0.5 percent to 8540.52 at 10:10 in New York.

Group of Seven finance ministers and central bankers are meeting in Washington today, and will stay in town for the International Monetary Fund and World Bank meetings this weekend. European Union leaders may gather in Paris on Oct. 12, three days before a scheduled summit in Brussels, Berlusconi said today, while Group of Eight leaders may hold a meeting on the crisis “in coming days,” he said.

Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are “talking about a new Bretton Woods.”

The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system.

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