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Rethinking the World Finances

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Rethinking the World Finances

This week’s G20 summit has the ambitious aim of redefining capitalism as we know it. The meeting of 24 leaders from the world’s developed and developing countries plans to attempt to reduce both the effects and the length of the global recession at a time when the world’s economies face their biggest challenge for decades.

On the agenda are major and pressing financial issues. Top of the list for many world leaders is the creation of a transparent banking system guided by international principles. Removing toxic assets from the world banking system is a main concern and many leaders and financial experts believe that until this is done, world recovery cannot begin.
"The restoration of the global credit system is fundamental to kick-start the economies in many countries,” comments Barry Aldridge, Director of Obelisk Private Finance, “and obviously this cannot be done until toxic mortgage assets are eradicated from global banking."

Several premiers believe the new banking principles should also include the transparency of hedge funds and an end to tax havens. France and Germany are particularly keen to bring this point to the top of the agenda while the US and UK think there are more urgent priorities. Some European countries would also like to reach an agreement on bankers’ pay to avoid situations created by the AIG bonuses in the US and pension arrangements in the UK.

Along with a more transparent banking system, restoring global growth is also a major challenge. The G20 summit is expected to reject protectionism, which Brazil’s President, Lula da Silva, believes is one of the most urgent problems facing world economies. Lula is also a keen advocate of a major change in global funding schemes and is keen for developing countries to have more say in international organisations such as the International Monetary Fund (IMF) and the World Bank.

The IMF has requested more funds for emerging markets and has already received US$100 billion from both Europe and Japan, an injection of funds which has almost doubled the Fund’s resources. Further funds are expected to be donated as a result of the G20 summit.

The summit comes at a time when there are timid signs of a slight improvement in world economies. Commodity prices have recovered, industrial activity is improving and the UK and US have recently both registered a rise in property investment and mortgage lending. “We obviously have a long way to go yet before we see clear signs of a recovery,” says Barry, “and any agreement that emerges from the G20 summit will be very welcome for the global financial situation.”

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