G-20 Just Another Expensive Talkfest

The G-20 summit in London on April 2 is a $30 million taxpayer paid extravagant talkfest. The G-20 was created in the wake of the Asian and Russian financial crisis of 1998. It is a group of developed and developing nations that coalesced to prevent future global financial crisis from developing ─ something they have obviously failed to do.

Because China holds the biggest inventory of foreign exchange reserves in the world, and because it looks to be one of the few major economies to show significant growth in the near future, it is being urged to boost the resources of the International Monetary Fund. Pressure was brought to bear on China because Japan, which holds $1-trillion in foreign reserves ─ the second-largest cache of foreign reserves ─ pledged $100 billion in loans to the IMF.

China is reluctant to give huge loans to the IMF because some of the European countries that would benefit from China’s contribution have been outspoken critics of China.

China is ranked 100 out of 192 U.N. members in terms of per-capita GDP despite the fact that it is the third biggest economy in the world after the U.S. and Japan. Many of the troubled countries the IMF wants to rescue have a per-capita income that is much higher than the average Chinese. They have also enjoyed at least one decade of economic prosperity and their living standards are still far higher than China’s. Even if China decides to inject a large sum of money, it is pointless to merely increase its weight in the organization. That is because the U.S. still holds veto rights in the decision-making process of the IMF. That has to change.

The voting rights of Brazil, Russia, India and China in the IMF are 9.62 percent of the total, together accounting for about half of the voting rights that the U.S. holds in addition to its sole veto power.

The IMF, like the World Bank, is a relic of World War II, created at the Bretton Woods conference in 1944, as the foundation cornerstones of the postwar world financial system. I advocated the abolition of both bodies along with the United Nations, or at the very least, their restructuring in my last book Custom Maid Knowledge, to give China and other developing countries greater say than the founding European nations and America now dependent on China have. The bank’s management structure reflects the world of the 1950’s, with Belgium having more voting power than China.

A new global central bank relevant to the 21st-century is long overdue. The world can no longer depend solely on the U.S. Federal Reserve to single-handedly micro-manage the global financial system with the IMF and World Bank playing second and third fiddle as its sidekicks. That is the only way to make sure that financial institutions doing business globally never again accumulate debt that is more than 30 times their capital and to make sure all central banks impose rational leverage ratios on their national banks.