Rebuilding the Global Financial System (GFS)

I am reliably informed that GPS car installations were the Christmas gift of choice in 2008.  Every time I get lost on the A43 into Lyon I pine for one! But what the world needs right now is a brand new GFS – Global Financial System.

This morning I sat for 30 minutes watching the BBC World Service gloomily recite the litany of falling markets around the world, Tokyo, Singapore, Frankfurt, London, and New York. The crisis is deepening. Last night Sky News reported that the Bank of England is seriously concerned that deflation may be about to drive home the final nail in the UK financial coffin. People with lots of money and with small amounts of money just will not spend because everyone is watching for prices to bottom out. Except that when they bottom out it may already be too late.

And, of course, as I have said before in this blog, it is the poor that are suffering and will continue to suffer most.

Watching France 2 last night here in Gaillard, France, I was chilled by a documentary about the number of elderly people now living a hairs breadth above the poverty line. People in their late sixties or early seventies. Often abandoned and without adequate pension cover. These are people in Western Europe now living on less than 2 dollars a day. One lady said that her total food budget for the month was 40 Euro. That’s as close as makes no difference to less than 2 US dollars per day. Frightening.

All of this has a bearing on current events. The G20 is about to meet. As Paul Keating, former Australian Prime Minister,  has wisely advised in a recent article in the Financial Times, it is time for the G20 and not the G7 to manage the global economy. It is time to bring creditor and deficit nations together. It is time to bring countries into the economic fold who have been up to now excluded by the wealthy G7. The current crisis is a G7 greed and governance crisis. A lot of humility is called for on the part of Western governments and finance ministries.

Maybe André Gorz, that old financial radical from the sixties and seventies, got it right when it forecast that the days of capitalism as we know it are numbered. Now we know that arrogant global capitalism is bad news for us all, not just the poor.

It is time for a radical change. And when the Financial Times calls for radical change, it is really time to pay attention!

Global financial confidence, once destroyed, requires myriad positive events and a heavy conversgence of them to counter ambient pessimism and gloom….A burst of inclusion is the only way to make the world anew. If it happens, the impact on confidence will be profound – outweighting all the packages put on the table to date.

Paul Keating, FT.Com, March 4th