Admittedly the devil is in the details, however, this is the most sweeping set of policies I have ever seen. The world as we knew it no longer exists. The US does not hold the high perch it has in the past. Actually all the G20 communique does is formalize what most business people already know concerning banking, trade finance, the rise of countries like China and India, etc. Americans (citizens of the US) could find this tough to swallow. Text in bold is my emphasis. From the UK Telegraph:
Gordon Brown hailed the G20 agreement as an "historic" moment which would help lift the world out of recession earlier than predicted.
Hundreds of billions of dollars in extra money was pledged along with a new clampdown on the worst excesses of the financial system.
Months of tense diplomatic negotiations resulted in the nine page communiqué issued on Thursday evening. These are the main points of the agreement:
The centerpiece of the announcement was a dramatic increase in the funding available to the International Monetary Fund (IMF).
The IMF currently has about $250 billion at its disposal to lend to countries facing financial difficulty. Several Eastern European countries have already sought assistance.
Under the G20 agreement, funding for the IMF will be increased by $500 billion to $750 billion. Japan agreed to provide $100 billion of the extra funding, the European Union $100 billion and China about $40 billion.
The IMF is also to begin selling off some of its gold reserves to establish a new $50 billion fund to help the developing world.
Emerging economies such as China are also expected to be given a greater say in the running of the IMF as part of the package.
An unprecedented crackdown on pay and bonuses for bankers was agreed by world leaders.
As disclosed in yesterday's Daily Telegraph, a new international set of rules will prohibit banks from paying traders and executives multi-million pound cash bonuses if they are making risky decisions. Regulators will assess how much risk traders are taking and those deemed to be making more risky decisions will only be paid in shares which cannot be sold for several years.
(My comment - banker + gangster = bankster. I found this on the internet earlier today. They are finally reining in the banksters.)
Global "quantitative easing"
At the behest of the world leaders, the IMF will increase the amount each country has in so-called Special Drawing Rights (SDR) by $250bn.
This is effectively global quantitative easing – comparable to the unprecedented measures the Bank of England carried out last month when it committed to pumping £75bn into the British economy. This is a form of printing money.
Under the IMF scheme, each country has an allocation of a shadow IMF currency – known as SDRs. This currency can be converted into useable currencies such as dollars, euros or sterling. The amount of SDRs was dramatically increased by more than ten-fold yesterday. The scheme is best regarded as a safety valve for struggling economies, and rich countries are likely to donate some of their SDR allocation to those most in need.
This was supposed to be the big centre-piece of the G20 summit - a global agreement on how much countries around the world would spend on measures to support their economies and fight unemployment.
However, the French and German governments ruled out an explicit commitment. All leaders could agree to announce was how much had already been pledged - $5 trillion. The Prime Minister hailed a statement that Governments would not rule out further bail-outs in future if required.
Offshore tax havens
Countries who refuse to pass information to foreign tax authorities to help catch potential tax evaders will face sanctions in future. A preliminary list of such offshore tax havens is to be published.
The G20 communique proclaimed: "The era of banking secrecy is over". Gordon Brown said that it was "the beginning of the end" for widespread tax avoidance.
However, it is yet to be seen what sanctions will be deployed against the tax havens despite lobbying from the French Government.
Most economists agree that until the world's leading nations cleanse the balance sheets of their stricken banks the credit crunch will persist and there will be no return to normal lending conditions.
The G20 communique recognises this issue and pledges that each country will dispose of the assets, either by setting up a so-called bad bank or by insuring the assets against default (as the UK has done). The commitment is slightly stronger than in previous international statements. But it does not go as far as many economists had hoped by pledging to set up new, healthy "good banks" which could provide fresh lending for households in the future.
The G20 member countries committed to a 12-month freeze on introducing any new trade barriers. In other words, they will not increase tariffs or quotas on goods imported from overseas. If followed to the letter, this would be a significant move. It was an increase in protectionism during the 1930s that lengthened and deepened the Great Depression, and ultimately fed the forces that caused the Second World War.
However, there is scepticism that this commitment will be met. A similar promise was made last November; since then the World Bank has found that 17 member countries raised trade barriers.
Beefed up international financial monitor
The summit agreed to turn the existing Financial Stability Forum (an international group of regulators) into a more pro-active global banking watchdog.
It will be renamed the Financial Stability Board and its membership will be broadened to developing nations including China, Brazil and India. Its job will be to monitor whether banks and financial houses are taking excessive risks, and to tell their national regulators to police them more stringently. However, critically, the new FSB will lack explicit powers to clamp down on companies which overextend themselves. There remains a major question mark over how much difference a relatively toothless regulator will make.
One of the major problems facing the global economy is the sharp drop in trade across the world – the first reduction in trading in a generation.
Exporters in the developing world have been unable to obtain credit in the wake of the global financial crisis.
Global leaders agreed to provide $250 billion in new trade credit guarantees. The guarantees – to be offered by the World Bank and other international institutions – should allow exporters to obtain credit once again. Mr Brown heavily pushed the scheme during his recent trip to South America.