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The G-7 meeting was the last chance for action before the global recession

Larry Kummer, Editor

On Friday the Group of Seven Finance Ministers and Central Bank Governors includes Canada, France, Germany, Italy, Japan, the United Kingdom and the US.  (The G-8 includes Russia)  They labored and brought forth this, which the weekend meeting of the IMF endorsed.  What does this mean, if anything?  We will find out what investors think of this on Monday.  See this for an analysis of the IMF meeting.

G-7 Finance Ministers and Central Bank Governors Plan of Action, 10 October 2008 — The statement consists of three sections.

  1. The preamble
  2. The Action statement (bold slogans)
  3. Wishful yearnings

The preamble

The G-7 agrees today that the current situation calls for urgent and exceptional action.  We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth.

The Action statement (bold slogans)

We agree to:

  1. Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.
  2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
  3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
  4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
  5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets.

Wishful yearnings (we’re doing the opposite of #1, #2 will be mostly ignored, #3 is the big one)

  1. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.
  2. The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries.
  3. We will use macroeconomic policy tools as necessary and appropriate.
  4.  We strongly support the IMF’s critical role in assisting countries affected by this turmoil.
  5. We will accelerate full implementation of the Financial Stability Forum recommendations and we are committed to the pressing need for reform of the financial system.
  6. We will strengthen further our cooperation and work with others to accomplish this plan.

Afterword

If you are new to this site, please glance at the archives below.  You may find answers to your questions in these, such as the causes of the present crisis.  I have been writing about these events for several years; since November 2007 on this site.  As you will see explained in these posts, the magnitude of the events now happening is beyond what most Americans have — or can — imagine.

Please share your comments by posting below.  Please make them brief (250 words max), civil, and relevant to this post.  Or email me at fabmaximus at hotmail dot com (note the spam-protected spelling).

For more information from the FM site

To read other articles about these things, see the FM reference page on the right side menu bar.  Of esp interest these days:

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