First published: Reuters, 14/11/2008
The election of Barack Obama as president of the United States has unleashed a welcome torrent of optimism during hard times. Aside from an especially demanding domestic policy agenda, the new president will also have his work cut out to rebuild the authority of and respect for U.S. leadership in the global community.
The G20 meeting in Washington on November 14-15, billed as the forum for rebuilding the world’s financial architecture, could not be happening at a more important time. We should be under no illusion, however, that results will occur in a week, despite the expectations. Anyway, the G20 has the more pressing issue of countering global financial instability and the global recession.
Nevertheless we – or they – need to think big and hope that new thinking from the Obama administration will be channeled precisely in the direction of global monetary reform. Part of the reason for the banking crisis, and its awful aftermath, was the untreated chaos in the global monetary system. Essentially, it was this chaos that contributed to exchange rate misalignment, the existence of unsustainably large external imbalances, and the creation of a debt mountain in advanced nations and excess savings in poorer nations.
If we are to stabilize the global economy in the longer term and be confident that periodic fires can be fought without risk of systemic failure, these issues need to b…more