Sunday, October 19, 2008

''Yes We Can' - 'Crises' Used as Pretense for EURO-Socialist Global Governance-based Wealth Redistribution - 'Change We Can Believe In'

''Yes We Can' - 'Crises' Used as Pretense for EURO-Socialist Global Governance-based Wealth Redistribution - 'Change We Can Believe In'"

Hard choices and challenges follow triumph
Obama ran on platform of change — now he must spell out exactly how

By Dan Balz

The Washington Post

November 5, 2008

...Rep. Rahm Emanuel (Ill.), the fourth-ranking Democrat in the House, argued that "no crisis should go to waste," meaning that the depth of the country's problems create an opportunity for the next president to offer big solutions on issues like energy and health care... Emanuel is under consideration to become White House chief of staff...



I. Introduction

II. European and Certain U.S. Leaders Are Using the Exaggerated Climate 'Crisis' as a Pretense for Strict New Global Governance Wealth Redistribution Regulations to Save the World from the Enviromental Externalities 'Triggered' by Anglo-American Market-based Capitalism

III. European and Certain U.S. Leaders Have Characterized the Current Financial 'Crisis' as One of Capitalism', and Are Using it as a Pretense to Reform Global Financial Markets as Part of an Overall Effort to Create a NEW Global Governance Regime Intended to 'Save' Anglo-American Market-based Capitalism From Itself'

IV. European and Certain U.S. Leaders Have Called for Global Financial Governance Reforms Based on Feared Similarities Between the Causes of 19th Century Globalization and the Current Era of Globalization. Certain U.S. Leaders Also Seek to Use This 'Crisis' as an Opportunity to Complete Their Long-Term 'European Experiment' Gone Awry

V. List of Sources (set forth below in order of appearance)


I. Introduction:

The following articles demonstrate efforts being undertaken by current and former public officials in Europe and the United States to sensationalize and exploit 'CRISES' (both real - financial and exaggerated - climate change) to justify the imposition, at the national, regional and global levels, of more public regulation of private economic activities. This pretense for more governmental control of peoples' private economic lives is NOT CONDITIONED ON the need to establish reasonable and fair 'rule of law' substantive and procedural benchmarks (verifiable empirical science, economic cost-benefit analysis, political checks and balances/balance of powers - accountability, transparency and 'due process) for the public benefit and consistent with individual rights. Unfortunately, the strict rules and regulations called for will, no doubt, impair individual rights and national sovereignty. They also fall outside the requirements of due process, transparency and political accountability which are guaranteed to ALL U.S. citizens by the U.S. Constitution and its accompanying Bill of Rights.

These 'leaders' implore their public constitutents to simply 'trust' in their knowledge, judgment, foresight and grandiose 'reputations' when, in reality, it is precisely their LACK OF wisdom, knowledge, foresight, sincerity and judgment that we all should be suspect of and concerned about!

NO. The burden is on governmental officials to present to the public credible evidence that substantiates and differentiates the real risks from the potential but remote hazards they have exaggerated, and which they claim must be reduced or eliminated (i.e., problems they wish to solve) immediately. If they are unable to prove that there is an urgent problem that necessitates 'fixing' in the first place AND that their recommended solutions to the problem identified provide the best 'fix' at 'the least cost' to individuals' political and economic rights, especially that of exclusive private property, then they CANNOT go forward with their proposals and/or recommendations, for they will NOT have the consent of the governed.

In the United States, the legitimacy of the 'rule of law' and the license to be governed by all branches of the U.S. Government, including the Executive, Legislative AND Judicial branches, derives from the consent of the American people. Former U.S. President Abraham Lincoln clearly recognized that the American nation was: 1) "conceived in Liberty and dedicated to the proposition that all men are created equal"; 2) uniquely and flexibly structured to serve the needs and interests of both the individual and the American people as a whole; and 3) one in which the government is constrained (limited) by the 'rule of law' (rather than based upon the 'rule of men'), founded on the universal principles set forth within the U.S. Declaration of Independence and the U.S. Constitution and its accompanying Bill of Rights. It is worth repeating to these 'leaders' that, the U.S. Government has long derived its legitimacy ONLY from the consent of the governed - i.e., the American people. THIS IS NOT EUROPE, WHERE THE PEOPLE DERIVE THEIR RIGHTS FROM THE GRACE OF THE GOVERNMENT!!

Arguably, the governing documents of the United States are as unique in today's world as they were when they were adopted during the 18th Century. The U.S. nation remains the oldest and most stable form of representative democracy (a true republic) in the world today. Thus, it would immeasurably benefit peoples around the world (but not perhaps their elitist leaders and governments) if these documents served as the framework for a new global 'rule of law' system of Governance 'Of the People, By the People, and For the People'.

According to one European legal expert:

"The purpose of the rule of law is to tame the discretionary power of government and thus enable individuals to pursue their private ends in efficiency-friendly way[s]. On the other hand, the rule of men is about the power of the ruling group to make discretionary changes in the pursuit of its own ends. A major difference between the rule of law and the rule of men is that the rule of law requires a well-defined, stable and credible process by which formal rules can be changed. In a rule of men state, changes in formal rules are a vehicle through which the ruling group seeks its ends."

See: SVETOZAR (STEVE) PEJOVICH, CAPITALISM AND THE RULE OF LAW: THE CASE FOR COMMON LAW 5 (2007) (emphasis added) (permission for citation obtained), referenced in Lawrence A. Kogan, The Extra-WTO Precautionary Principle: One European 'Fashion' Export the United States Can Do Without, 17 Temple Political & Civil Rights Law Review 2, (Spring 2008) 491, 602-603, fn 574, at: .

For example,

"...the European regulators’ historical inclination is to subjugate individual rights and freedoms to “social obligations” and “socially beneficial” causes." International law experts agree that European citizens are deemed to enjoy only a positive implied conditional right to private property that is highly subject to “collective power” and the “public interest”— that is, the “general will.” Id., at pp. 598-599.

"[T]he constitutional rights of European citizens have long been viewed as “positive rights” granted by the state to the people, rather than as “negative rights” of the people recognized by the state." See: Lawrence A. Kogan, Europe’s Warnings on Climate Change Belie More Nuanced Concerns, Institute for Trade, Standards and Sustainable Development (June 2007) at: .

"A brief review of German legal and political history is quite revealing. According to Humboldt University law professor Dieter Grimm, the constitutions and bills of rights previously enacted by successive German monarchs were intended to preserve the legitimacy and survival of their dynasties, and little more. As a result, they created “positive” rather than “negative” rights that subsequently failed to endure the political whims of national parliaments and to secure consent from short-term-minded monarchs and unelected bureaucracies." Id., at note 17, at 4.

By comparison,

"One purpose of the American Revolution, therefore, was to strengthen and protect the people’s fundamental rights. Consequently, fundamental rights “could from the very beginning be negative rights” that served primarily to protect individuals from the government . . . . In contrast . . . the inclusion of positive rights in German law can be traced to the fact that European constitutions, unlike the U.S. Constitution, did not establish an entirely new political entity because the nation-state existed before the constitutions emerged. This meant “they never changed the tradition of the state,” and part of this saved tradition, especially in Germany, was that “the state always retained the role of being the representative of the higher aspirations of society.”

See: Press Release, Elizabeth Katz, University of Virginia School of Law, German High Court Has More Power Over Legislature, Grimm Says (Mar. 9, 2006), at: .


II. European and Certain U.S. Leaders Are Using the Exaggerated Climate 'Crisis' as a Pretense for Strict New Global Governance Wealth Redistribution Regulations to 'Save' the World from the Environmental Externalities Triggered by Anglo-American Market-based Capitalism:

Gore compara el cambio climático con la crisis financiera

English Translation:

Al Gore compares the financial crisis with climate change

PEDRO Gorospe - Bilbao - 16/10/2008

Former U.S. vice president and Nobel Peace Prize winner Al Gore warned today during a conference held at the Guggenheim museum in Bilbao that climate change is "the worst crisis faced by humanity," but at the same time offers opportunities for business and investment, and has compared with the global financial crisis...


For Example:

[See: Edition - Sarkozy piqué au vif par sa poupée vaudou, (Oct. 21, 2008) at:,,4131292,00-sarkozy-veut-jeter-un-sort-a-sa-poupee-vaudou-.html ("Le président a demandé à l'éditeur d'un manuel vaudou vendu avec une poupée à son effigie le retrait du produit, sinon il le poursuivra en justice. Le kit à l'effigie de Ségolène Royal pourrait aussi faire l'objet de poursuites, selon l'avocat de cette dernière." //"The president asked l' editor d' a handbook voodoo sold with a headstock with its effigy withdrawal of the product, if not it will prosecute it. The kit with l' effigy of Ségolène Royal could also make l' object of continuations, according to l' lawyer of the latter.")

[See: Obama campaign outraged by New Yorker cover, Agence France Presse (July 14, 2008) at: ("Barack Obama's campaign decried Monday a satirical cartoon on the cover of The New Yorker magazine showing the Democratic presidential hopeful wearing Islamic dress while his wife holds a Kalashnikov. The influential weekly defended its cover, titled "The Politics of Fear," as a critique of unfounded allegations during the campaign that have attempted to paint Obama, who is Christian, as a closet radical Muslim. "The New Yorker may think, as one of their staff explained to us, that their cover is a satirical lampoon of the caricature Senator Obama's right-wing critics have tried to create," Obama spokesman Bill Burton said. "But most readers will see it as tasteless and offensive. And we agree," he said in a statement.")]

[See: Czech President Vaclav Klaus and ITSSD CEO Share Some Thoughts and Ambitions Concerning Freedom & Climate Change, ITSSD Journal on Economic Freedom, at: ].

[See: Lawrence Kogan, Europe’s Warnings on Climate Change Belie More Nuanced Concerns, ITSSD (June 2007), supra.]

[See: Czech President Vaclav Klaus Has Long Warned Against Global 'Europeanism': But is the 110th U.S. Congress Listening? Does it Want This for America??, ITSSD Journal on Economic Freedom, at: ].

[See: ITSSD Website - Issues - Negative SD and Brussels Centralized Decision-Making: ]

[Czech President Vaclav Klaus – Brussels Promotes Far-Reaching Regulation of Human Activities and Standardization & Harmonization of Human Life ]

[Czech President Vaclav Klaus – EU Requirements Have Brought More Regulation, Government Intervention, Political Correctness and Popular ‘Isms’ That Jeopardize Freedom ]

[Czech President Vaclav Klaus – There is a Dangerous Tendency of the Current World to Legislate Everything, Which Threatens to Lead to Supranational Global Governance ]

[Czech President Vaclav Klaus – On The Nuanced Threat Posed by
Intellectuals and 'Soft' Socialism ]

[Czech President Vaclav Klaus – The Paternalistic, Overregulated Regional European Welfare State Economic System Shares Features With Communism and Limits National Sovereignty ]

[Czech President Vaclav Klaus -- The Biggest Threat to Freedom, Democracy, the Market Economy and Prosperity Now is Ambitious Environmentalism, Not Communism ]

[Czech President Vaclav Klaus – Western Europe Owes its Successful Sixty Years of Development to American Presence in Europe ].


...Faced with the Basque government to complete, political representatives and key executives of large companies Basque, Al Gore, after posing in the picture next to Ibarretxe, has delivered a lecture entitled Thinking green; an economic strategy for the twenty-first century in the who has compared the global financial crisis with the deterioration of the environment. In his view, the turbulence caused by garbage or subprime mortgages in the United States who have ended up intoxicated at the international system are very similar to the "carbon junk bonds" that are polluting the entire atmosphere. Moreover, in both cases it is a global crisis...


...In the event that the Department of Industry of the Basque government had organized since 2006 to celebrate the 25th anniversary of the Basque Energy (SLE) and who has been held now because they could not take place in 2007, Al Gore has addressed directly against directors of companies such as Iberdrola and Gamesa Basque, who has emphasized his role in the deployment of new renewable energy. "Euskadi is a small country with big companies," has valued...

[The Basque Country (Basque Euskadi, Spanish País Vasco) is an autonomous community in northern Spain. It was granted the status of historical region within Spain with the Spanish Constitution of 1978. The capital is Vitoria-Gasteiz (Vitoria is the name in Spanish, Gasteiz in Basque). See: Basque Country (autonomous community), Wikipedia, at: ].

...In this regard, the manager of the documentary entitled An Inconvenient Truth has admitted that nuclear power can have a role in the energy future, but will not be the principal. This space is reserved for what wind, solar or geothermal energy.





ABC deems Gore climate change advert too 'controversial' for TV

By Elana Schor in Washington,

Friday October 10 2008 18.29 BST

The ABC network has refused to air an advert produced by Al Gore's environmental group, ruling that its charge of US government favouritism to the oil industry is too "controversial" for television.

The TV commercial, part of the WE campaign run by Gore's Alliance for Climate Protection, was submitted for airing after this week's presidential debate between Barack Obama and John McCain - both of whom have vowed to limit greenhouse gas emissions if elected.

But ABC concluded that the advert violated its internal policy against "controversial" content during network-sponsored programmes, network spokeswoman Julie Hoover told the Guardian.

"All of our advertising is reviewed on a case-by-case basis, and the context of this particular ad was determined not to be acceptable per our policy on controversial issue advertising," Hoover said.

The WE campaign has since attracted more than 170,000 supporters to an online petition drive asking ABC to reconsider its decision.

The script of the advert is similar in tone to political speeches made by Obama and McCain during the election season. An unseen narrator states that climate change can be combated through wind and solar power as well as "end[ing] our dependence on foreign oil".

Over an image of a young child playing with blocks, the narrator continues: "So why are we still stuck with dirty and expensive energy? Because big oil spends hundreds of millions of dollars to block clean energy. Lobbyists, ads, even scandals. All to increase their profits, while America suffers."

An ABC email published on the blog of Grist magazine stated that the advert was rejected due to its split-second shot of the US Capitol building.

"Per our guidelines, national buildings may be used in advertising provided the depictions are incidental to the advertiser's promotion of the product or service," the email stated. "Given the messages and themes of this commercial, the image of the Capital [sic] building is not incidental to this advertising."

Cathy Zoi, [former Former White House Deputy Director for Environmental Policy and Chief of Staff At the White House Council On Environmental Quality, in the two Clinton-Gore Administrations] chief executive of the WE campaign, called ABC's decision "outrageous" in light of US networks' frequent airing of adverts from Chevron, Exxon Mobil and other oil companies.

"As our country faces deep economic problems, we need to be able to have an honest debate about the root causes of our problem," Zoi wrote in an email to supporters of Gore's group on Wednesday.


To build publicity for their products, American companies often produce TV adverts with content that pushes the limits of broadcast standards. A Snickers commercial featuring two men embarrassed after sharing a kiss was pulled from the US airwaves last year after complaints from gay-rights groups.

But rejection of an advert from a non-profit group is a far more rare occurrence. At the height of the US controversy over same-sex marriage in 2004, CBS and NBC turned down a commercial from the United Church of Christ that touted its acceptance of gay congregants.



III. European and Certain U.S. Leaders Have Characterized the Current Financial 'Crisis' as 'One of Capitalism' and Are Using it as a Pretense to Reform Financial Markets as Part of an Overall Effort to Create a NEW Global Governance Regime Intended to 'Save Anglo-American Market-based Capitalism From Itself':,Authorised=false.html?

Sarkozy calls for European wealth funds

By Joshua Chaffin and Tony Barber

Financial Times

Oct. 21, 2008

Nicolas Sarkozy, France’ president, called on Tuesday for the creation of European sovereign wealth funds to buy stakes in companies with low share prices and protect them from non-European predators. Stock markets are at a historically low level.

There could be an opportunity to create our own sovereign wealth funds, which would make it possible to defend national interests and European interests, Mr Sarkozy said in remarks at the European Parliament.

His proposal underlined how some European Union leaders are seizing on the global financial crisis as a calamity that exposes the failure of US-style free markets and justifies a return to the state’s traditionally strong role in European economic policy.

EU leaders also see the crisis as an opportunity to reshape the world’s financial institutions, which were designed largely by the US towards the end of the second world war, and to give more influence to rising powers such as China and India as well as Europe itself.

Mr Sarkozy, generally regarded as the most pro-US French leader in several decades, said in his speech that it was no longer acceptable for the rest of the world to finance US current account deficits, or for the US to dominate the international credit rating agency industry and the setting of accountancy rules.

He said he would use a visit to Beijing this week to try to persuade the leaders of China and India to attend a summit on reforming the world’s financial system. The summit is likely to be held soon after next month’s US presidential election. They’ve got to be invited. They are essential partners in the international system, Mr Sarkozy said. This is a global crisis, so the response can only be global. If we are not bold, it will be fatal

Mr. Sarkozy’s proposal for European sovereign wealth funds played on the fear that certain companies, particularly so-called strategic assets, might be vulnerable to foreign takeover because the stock market carnage sparked by the financial crisis has driven their share prices so low.

Jose Manuel Barroso, European Commission president, said on Tuesday that some EU leaders had mentioned this fear at a summit in Brussels last week. But the proposal sits uneasily with the EU’s stance on foreign sovereign wealth funds, which are state-owned investment agencies in control of enormous foreign currency reserves and which are based everywhere from Abu Dhabi and Saudi Arabia to China and Singapore.

On the one hand, the authorities in Brussels have sought agreement with the funds on a voluntary code of conduct, stressing principles such as transparency and investments based on commercial rather than political motives. On the other, Brussels has tried to reassure the funds that the EU welcomes foreign investment and does not suspect them of plotting unwanted raids on prized European companies.

Mr Sarkozy’s proposal drew no public response from the European Commission on Tuesday. But it will ring alarm bells with critics who fear that Europe’s emergency actions in the financial ‘crisis’ particularly this month’s‚ 2,000bn rescue for the financial sector, are already whetting an unhealthy appetite for state intervention and protectionism.

European carmakers are demanding low-interest loans to match those awarded to the big US car manufacturers, and European industrialists are demanding concessions to offset the costs of meeting EU targets for fighting climate change.


UN Secretary General offers host financial summit

The Associated Press

October 18, 2008

QUEBEC CITY: U.N. Secretary General Ban Ki-moon offered Saturday to host an emergency expanded G8 summit at the United Nations headquarters to discuss the global financial crisis.

Ban issued a statement backing French President Nicolas Sarkozy's recent appeal for world leaders to act collectively to address the economic meltdown by holding a summit of major economic powers by December.

Ban and Sarkozy met in Quebec City on the sidelines of a summit of French-speaking nations. Sarkozy cut short his stay at the three-day Francophone meeting to discuss plans for such a summit Saturday afternoon with U.S. President George W. Bush at the presidential retreat in Camp David, Maryland.

"I strongly believe that holding the summit at the United Nations, the symbol of multilateralism, will lend universal legitimacy to this endeavor and demonstrate a collective will to face this serious global challenge," said Ban.

Sarkozy said Friday that the world's financial system needs to be overhauled so that it can be better supervised in the wake of the crisis.

"Together we need to rebuild a capitalism that is more respectful to man, more respectful to the planet, more respectful to future generations and be finished with a capitalism obsessed by the frantic search for short-term profit," Sarkozy said in an address to the Organisation International de la Francophonie during the opening ceremony of the summit Friday night.


Along with the economic crisis, Canada and the European Union have also been talking about stronger economic co-operation through a potential Canada-EU trade pact.

Officials have said that the agreement would allow for Canadian and European workers to work in each other's regions and allow for EU and Canadian companies to bid on government procurements.

Canadian Prime Minister Stephen Harper, who is also attending the summit, said that Canada and the EU plan to launch negotiations on an economic partnership as soon as possible in 2009.

The possibility of a broad agreement follows a Canada-EU joint study launched in Berlin last year and released earlier this week that recommends a more comprehensive economic plan for both parties.

Leaders of French-speaking nations, attending the summit which ends Sunday, are discussing the financial crisis, climate change, human rights and the French language.

The 12th annual La Francophonie is being attended this year by representatives of 55 member countries and 13 observer nations.


UN chief offers to host global financial summit

By Carley Petesch

Associated Press

October 20, 2008

NEW YORK — U.N. Secretary-General Ban Ki-moon has offered to host an emergency expanded G8 summit at the United Nations to discuss the global financial crisis.

Ban issued a statement Saturday backing French President Nicolas Sarkozy's recent appeal for world leaders to act collectively to address the economic meltdown by holding a summit of major economic powers by December.

Ban, who met Sarkozy in Quebec City on the sidelines of a summit of French-speaking nations over the weekend, agreed that a collective approach is necessary to manage the international financial crisis.

"Holding the summit at the United Nations, the symbol of multilateralism, will lend universal legitimacy to this endeavor and demonstrate a collective will to face this serious global challenge," Ban said.

Ban said he also supported the idea of convening the forum in early December at the latest.
"Such a format will allow us to more effectively act upon this crisis which requires a global solution through cohesive international partnership," the secretary-general said.

The Group of Eight major industrial nations announced Wednesday they would hold the global summit to forge common action to prevent another economic meltdown.

Sarkozy said all European Union nations now backed radical restructuring of international institutions like the International Monetary Fund and World Bank. He demanded that the summit take place in November "preferably in New York, where everything started" and lead toward "a new capitalism."

EU leaders meeting in Brussels on Wednesday "all agreed that we don't want the same causes to produce the same effects in future," he said. "Europe will not let this crisis pass without taking action."

British Prime Minister Gordon Brown said the meeting would require vision similar to the creation of the U.N. and the Bretton Woods conference that laid out an international financial and monetary system in the 1940s. Emerging economies such as China and India and European economies outside the G-8 should also participate, he said.


Swapping Secrecy for Transparency



New York Times

Oct. 19, 2008

THE historic volatility in the financial markets has raised important questions about the lack of meaningful regulation of financial instruments known as credit-default swaps. The $85 billion government rescue last month of the insurance conglomerate American International Group, for example, was needed in large part to protect those who held A.I.G.’s credit-default swaps and risked crushing losses if those instruments weren’t honored.

A.I.G. had issued $440 billion in credit-default swaps — which are like insurance contracts on bonds and other assets that are meant to pay off if those assets default. But as markdowns on A.I.G.’s investments in subprime mortgages led to downgrades in its credit ratings, the holders of the credit-default swaps demanded more collateral, which A.I.G. could not provide.

As large as A.I.G.’s swaps exposure was, it represented only 0.8 percent of the $55 trillion in credit-default swaps outstanding — this total market is more than the gross domestic product of all nations on earth combined.

Yet despite its enormous size, the credit-default swaps market has operated in the shadows. There is no public disclosure nor any legal requirement for these contracts to be reported to the Securities and Exchange Commission or any other agency. So government regulators have had no way to assess how much risk is in the system, whether credit-default swaps have been accurately valued or honestly traded, and when people issuing and trading them have taken on risk that threatens others.

Because these instruments have been bought and sold widely and in many cases anonymously, they have trapped the large financial institutions in a web of transactions. This has created systemic risk that is particularly serious in the current stressful economic environment, contributing to a gravitational pull that stands to drag everyone down.

All investors — from individuals through their 401(k) plans to pension funds and asset managers — are paying a price today for the lack of oversight. We must urgently address the problems created by this unregulated environment.

Credit-default swaps are not inherently good or evil. They play an important role in the smooth functioning of capital markets by allowing a broad range of institutional investors to manage the credit risks to which they are exposed. They are also a useful means for investors to signal their view of an entity’s business prospects and creditworthiness.

But our markets function best when they are highly transparent, when everyone can see exactly which transactions are occurring and what the instruments being traded are worth. This gives investors confidence that they can accurately assess risk.

Back in 2000, Congress specifically decided not to regulate credit-default swaps. At that time, this market was just a few years old and still very small. For example, in 1999 a report by the President’s Working Group on Financial Markets envisioned no systemic risk from such derivatives since “private counterparty discipline” — investors’ natural desire to keep their own risks to a minimum — would work to protect the broader financial system.

But the market for credit-default swaps has recently mushroomed. In just the past two years, it has doubled in size. And as the market has grown, private counterparty discipline has proven inadequate. As we have seen, individual market participants did not pay enough attention until it was too late.

To place a value on credit-default swaps and the mortgage-related securities they insure, buyers and sellers of swaps relied too heavily on financial models that couldn’t predict the mortgage market meltdown. They also trusted too much in the credit ratings of the securities and of the firms selling the credit-default swaps, and these ratings underestimated the risk.

Congress needs to fill this regulatory hole by passing legislation that would not only make credit-default swaps more transparent but also give regulators the power to rein in fraudulent or manipulative trading practices and help everyone better assess the risks involved.

Congress could require that dealers in over-the-counter credit-default swaps publicly report both their trades and the value of those trades. This would make the market more transparent, and make it easier for everyone engaged in credit-default swaps to assess their value. It would also provide regulators with the information they need to uncover unfair or fraudulent practices and to monitor risk.

Then, the Securities and Exchange Commission should be given explicit authority to issue rules against fraudulent, deceptive or manipulative acts and practices in credit-default swaps.

Finally, Congress could provide support for federal regulators to mandate the use of one or more central counterparties — financially stable clearance and settlement organizations — and exchange-like trading platforms for the credit-default swaps market. As it is now, it is often impossible even to know who stands on the other side of a swap contract, and this increases the risk involved. We at the S.E.C. are already working with the Federal Reserve, the Commodity Futures Trading Commission and industry participants to accomplish these goals on a voluntary basis, using the authority we currently have.

Because of the truly global nature of the over-the-counter derivatives market, we will need to work closely with governments in other major markets. The climate for such cooperation is good, because the cross-border impacts of the current market problems are obvious to all.

Transparency is a powerful antidote for what ails our capital markets. When investors have clear and accurate information, and when they can make informed decisions about where to put their resources, money and credit will begin to flow again. By giving regulators the authority they need to bring the credit derivatives market into the sunshine, we can take a giant step forward in protecting our financial system and the well-being of every American.

Christopher Cox is the chairman of the United States Securities and Exchange Commission.


Bush to Host First in Series of Summits on Financial Crisis

By Roger Runningen and Gregory Viscusi

Bloomberg News

Oct. 19, 2008

Oct. 19 (Bloomberg) -- The leaders of the U.S., France and the European Commission will ask other world leaders to join in a series of summits on the global financial crisis beginning in the U.S. soon after the Nov. 4 presidential election.

President George W. Bush, French President Nicolas Sarkozy and European Commission President Jose Barroso said in a joint statement after meeting yesterday that they will continue pressing for coordination to address ``the challenges facing the global economy.''

The initial summit will seek ``agreement on principles of reform needed to avoid a repetition and assure global prosperity in the future,'' and later meetings ``would be designed to implement agreement on specific steps to be taken to meet those principles,'' the statement said.

European leaders have pressed to convene an emergency meeting of the world's richest nations, known as the Group of Eight, joined by others such as India and China, to overhaul the world's financial regulatory systems. The meetings are to include developed economies as well as developing nations.

``The first task is to stabilize the financial markets in our own countries,'' Bush said in welcoming Sarkozy and Barroso to the Camp David presidential retreat in rural Maryland. ``Given that the world has never been more interconnected, it is essential that we work together because we're in this crisis together.''

Free Markets

He stressed that any steps to prevent future crises must maintain and strengthen the free-market system.

``It is essential we preserve the foundations of democratic capitalism,'' Bush said.

Sarkozy and Barraso are pressing Bush for a G8 agenda that includes stiffer regulation and supervision for cross-border banks, a global ``early warning'' system and an overhaul of the International Monetary Fund. Talks may also encompass tougher regulations on hedge funds, new rules for credit-rating companies, limits on executive pay and changing the treatment of tax havens such as the Cayman Islands and Monaco.

Sarkozy and Barroso, in separate statements, welcomed Bush's offer to host the first summit.

``We want to work hand in hand with the Americans to create the capitalism of the 21st century,'' [SOCIALISM] Sarkozy said. ``The meeting should be held rapidly, perhaps before the end of November. Since the crisis started in New York, maybe we can find the solution in New York.''

Need for Reform

Barroso said an ``unprecedented level of global coordination'' is needed to address market instability.

``The international financial system -- its basic principles and regulations and its institutions need reform. We need a new global financial order,'' he said.

U.S. Treasury Secretary Henry Paulson and French Finance Minister Christine Lagarde also attended tonight's meeting at Camp David.

United Nations Secretary-General Ban Ki-moon today offered to host a summit at UN headquarters in New York City by early December.

The leaders decided to pursue a series of summits because the task was too ambitious to be dealt with in a single meeting, White House spokesman Tony Fratto told reporters later.

It was ``a reasonable expectation'' that the first summit would be scheduled for November though ``not necessarily'' in New York, he said. Fratto didn't name a location and said there are numerous logistics hurdles in bringing together ``a large number of countries in a very short time.''

He said it was ``premature'' to say whether a second summit would be held before Bush left office in three months.

Banking Regulation

British Prime Minister Gordon Brown is pushing for greater cross-border oversight of the global financial system. He has said each of the world's top 30 banks should be under the supervision of a panel of regulators from the countries where those institutions do business.

``The reform of the international financial system is not only necessary to prevent a crisis happening again, it is essential to end the current crisis,'' Brown said on Oct. 16.

Bush, 62, has cautioned that any revamping must not restrict the flow of trade and investment or set a path toward protectionism. The G8 nations are Britain, Canada, France, Germany, Italy, Japan, Russia and the United States. The U.S. hasn't committed itself to the sweeping terms of Europe's agenda, White House press secretary Dana Perino said yesterday.

``There are other countries that are going to have ideas, as well,'' she said.


Leaders to rethink global finance

BBC News

Oct. 19, 2008

President George W Bush has invited world leaders to gather in the US by the end of the year to discuss reform of the global financial system.

The summit would be the first of a series announced after talks between Mr Bush, French President Nicolas Sarkozy and EU Commission chief Manuel Barroso.

But the agenda is unclear and differences are already emerging.

Mr Bush said any plan must not undermine free markets. Mr Sarkozy said "hateful practices" must be abandoned.

Before he arrived at Camp David, the US presidential retreat in the state of Maryland, the French leader warned the world could not "continue to run the economy of the 21st Century with instruments of the economy of the 20th Century".

Calls for action

After the meeting, Mr Bush said: "It is essential that we work together because we are in this crisis together."

Together we will work to modernise and strengthen our nations' financial systems so we can help ensure this crisis doesn't happen again.

US President George W Bush

He went on to invite world leaders to an economic summit after the US election in November, to discuss responses to the current financial crisis.

"Together we will work to modernise and strengthen our nations' financial systems so we can help ensure this crisis doesn't happen again," he added.

But Mr Bush said any plan to rethink financial mechanisms should "preserve the foundations of democratic capitalism" and include "a commitment to free markets, free enterprise and free trade".

'New order'

Mr Sarkozy said the crisis could offer a "great opportunity" to build the capitalism of the future and leave behind the "hateful practices" of the past.


We cannot continue along the same lines because the same problems will trigger the same disasters

French President Nicolas Sarkozy

"We cannot continue along the same lines because the same problems will trigger the same disasters," he warned.

Mr Sarkozy said the hedge funds, tax havens and financial institutions operating without supervision should all be re-thought.

"This is no longer acceptable," he added. "This sort of capitalism is a betrayal of the sort of capitalism we believe in."

European Commission President Manuel Barroso, who also took part in the talks, said: "We need a new global financial order."

Details of the summits are still to be worked out, but White House spokesman Tony Fratto said the first was likely to be held in November.

He added that Mr Sarkozy had recommended New York as a location. UN Secretary General Ban Ki-moon has proposed using the organisation's headquarters there as a venue.

That summit would seek to "review progress being made to address the current crisis and to seek agreement on principles of reform needed to avoid a repetition," the leaders said in their statement.

"Later summits would be designed to implement agreement on specific steps to be taken to meet those principles," it added. Other world leaders are to be consulted over the plan.

Correspondents say such meetings would echo the Bretton Woods conference of 44 nations after World War II, which established many of the institutions and monetary systems that are now under threat.


US to host global finance summit

BBC News

Oct. 19, 2008

The presidents of the US, France and the European Commission have unveiled plans for a series of summits to discuss the global financial crisis.

Speaking before talks at Camp David with Nicolas Sarkozy and Jose Manuel Barroso, George W Bush said it was "essential that we work together".

The first summit will be held in the US after November's presidential election.

The Europeans want the meetings to pave the way for talks on an overhaul of the world's financial regulatory systems.

Before he arrived at Camp David, the presidential retreat in the state of Maryland, Mr Sarkozy warned the world could not "continue to run the economy of the 21st Century with instruments of the economy of the 20th Century".

Calls for action

The BBC's Adam Brookes in Washington says that against the beautiful autumnal backdrop of the retreat, Mr Bush uttered words of cold comfort to his French counterpart and Mr Barroso.

Together we will work to modernise and strengthen our nations' financial systems so we can help ensure this crisis doesn't happen again.

US President George W Bush

"It is essential that we work together because we are in this crisis together," he said.

Mr Bush went on to invite world leaders to a global economic summit in the US soon to talk about the global response to the financial crisis.

"Together we will work to modernise and strengthen our nations' financial systems so we can help ensure this crisis doesn't happen again," he added.

But Mr Bush asserted that any plan to re-think the mechanisms of the global financial system could not be allowed to undermine the free market.

"It is essential that we preserve the foundations of democratic capitalism - a commitment to free markets, free enterprise and free trade," he said.

'New order'

President Sarkozy seemed to have a rather more sweeping vision to deal with what he called a "worldwide crisis", our correspondent says.

He said the crisis could offer a "great opportunity" to build the capitalism of the future and leave behind the "hateful practices" of the past.

We cannot continue along the same lines because the same problems will trigger the same disasters

French President Nicolas Sarkozy

"We cannot continue along the same lines because the same problems will trigger the same disasters," he warned.

Mr Sarkozy said the hedge funds, tax havens and financial institutions operating without supervision should all be re-thought.

"This is no longer acceptable," he added. "This sort of capitalism is a betrayal of the sort of capitalism we believe in."


Mr Barroso said European nations had taken swift action to tackle the squeeze in the financial markets, but stronger and more effective global action was now required.

"We need a new global financial order," he added.

Details of the summits are still to be worked out, but White House spokesman Tony Fratto said the first was likely to be held in November.

He added that Mr Sarkozy had recommended New York as a location. UN Secretary General Ban Ki-moon has proposed using the organisation's headquarters there as a venue.

That summit would seek to "review progress being made to address the current crisis and to seek agreement on principles of reform needed to avoid a repetition," the leaders said in their statement.

"Later summits would be designed to implement agreement on specific steps to be taken to meet those principles," it added. Other world leaders are to be consulted over the plan.

Correspondents say such meetings would echo the Bretton Woods conference after World War II.

At Bretton Woods, world leaders agreed to establish the International Monetary Fund and the International Bank for Reconstruction and Development, the original institution of the World Bank Group, in an effort to prevent a repeat of the depression of the 1930s.

'Big enough and bold enough'

Earlier on Saturday, in his weekly radio address, Mr Bush sought once again to reassure Americans about the $700bn bail-out of US financial institutions.

Elements of the plan are similar to those earlier announced by European governments.

The president said the federal government had taken "aggressive measures" to protect financial security.

The BBC's Jane O'Brien in Washington says European leaders have in the past blamed the US for the crisis, which started when borrowers began defaulting on their mortgages.

But she adds that Mr Sarkozy, whose country currently holds the EU presidency, has made it clear he wants to move away from finger-pointing and towards a partnership with the US.


EU advice on money: Should the EU give counsel on resolving the credit crunch?


Oct. 19, 2008

Sir, It is truly disturbing in the current economic and financial global crisis to witness Presidents Sarkozy and Barroso strutting about at Camp David with President Bush. The idea that the European Union can offer a solution to current world problems must be weighed against its own systemic failures over the last few decades.

The failure of the Lisbon economic agenda, the high and increasing levels of unemployment in the euro-zone, the massive costs of over-regulation which are destroying enterprise, the total failure of the Stability and Growth Pact, the assumed irreversible nature of the European Union legal framework, and the promotion of bureaucracy at the expense of democracy is testament to the reasons why the current model of the European Union is not fit for purpose.

International conferences and co-operation based on free and fair markets and democratic principles are necessary and laudable, but no confidence can possibly be placed in the track record of the current model of European Union speaking with its so-called single voice, whose economic failures precede the current financial crisis and are partly responsible for it.

Economic success will only come about if the European Union reverts to an association of democratic nation states co-operating together but without a centralised, bureaucratic, undemocratic model of government.

Bill Cash, MP
House of Commons, SW1


Browncesceau saves the world? No

The Royal Gazette – Bermuda

ON THE MONEY Roger Crombie

Oct. 18, 2008

A quick question: What is the capital of Iceland? Answer: $74.25.

Because of the financial crisis, I had to make a mercy dash to the UK last week, to help Gordon Brown, the British Prime Minister, avoid making a series of catastrophic mistakes.

Unfortunately, I got there 40 years too late. I have in the past been unkind about Mr. Brown, but I realise now how wrong I was. He is by no means a fool; he is a dangerous, dogmatic dimwit. For ten long years, he has relentlessly driven the British economy down the drain at full speed, burying his borrowing so that no one would find out just how badly off the British really are.

Mr. Brown has now achieved an even greater feat. Having bankrupted the country over his decade as Chancellor of the Exchequer, he has gone himself one better as Prime Minister and bankrupted it all over again.

Like all the 1960s socialists who clog up Britain, and in some cases Bermuda, Mr. Brown is married to the idea that Government knows best. His heroes are the discredited socialist leaders who drove Britain onto the rocks in the 1960s and 1970s: Harold Wilson, James Callaghan, Michael Foot and all the other sad, wet people who blighted the country.

The economic model to which Mr. Brown aspires is that of Romania under Nicolae Ceausescu, the "communist" dictator, in which all power accrued to the Government, and the people were in essence wards of state. Ceausescu was despatched by a firing squad, in part for undermining the economy.

On Monday, Mr. Browncesceau showed us what he was made of when he nationalised the British banks. In a performance that would have been howlingly funny, had it not been tragically sad, Mr. Browncesceau likened himself to Winston Churchill, a proper politician.

(A big head seems to be a prerequisite for the job: Mr. Ceausescu referred to himself as the "genius of the Carpathians".)

For a couple of days, Mr. Browncesceau was credited with saving the world, even though the nationalisation idea was not his.

Similar plans have been batted about since the 1960s, when the banks were on Harold Wilson's hit list, but he was too busy nationalising (and destroying) a long list of other industries. The Swedes had a very similar plan early in the 1990s, when their banking sector experienced bumpy conditions.

There are so many reasons why nationalising banks is a bad idea that I hesitate to list them here.

Instead, I'll just mention one: it doesn't work. As we saw by the end of the week, credit lines were once again frozen and nothing good had happened to anyone. Browncesceau to the rescue? My foot.

(Full disclosure: I have a few hundred Pounds in an account with a British bank that merged with another bank after I opened the account.

The merged bank was bought by another bank, which in turn was bought by another bank, which has now been forcibly taken over by Mr. Browncesceau, a man with no banking experience. I'll be transferring the money to a bank operated by actual bankers with banking experience.)

To reach the UK, I flew on British Airways. Remember them? Lord, how everyone hates them. But there was a reason I didn't fly Zoom.

Now, what was it? Let me see. Oh yes, Zoom provided a thoroughly unreliable "service" for a brief period and then went out of business, taking its customers' money with it. British Airways, however, has been serving Bermuda since 1937-ish. Lesson for the week: cheap ain't cheap if you don't receive what you paid for.

Most of the British local councils and hundreds of thousands of British taxpayers apparently had their money in Icelandic banks, because those banks were paying more in interest on deposits. This is the Zoom situation in reverse, but the principle is the same. There are no bargains in this world, only false economies.

While my heart breaks for those dumb enough to have invested in Iceland, my brain remembers that the rest of us have to get by on regular rates of return, because in the long run, it is better to earn a regular rate of interest than to lose your capital.

Here are the facts, kiddies, and you might as well get used to them. We are in for a recession.

The major global economies are going to have a rough time of it for a couple of years.

Bermuda will be somewhat affected, no doubt. There won't be any new hotels; some of the office buildings in Hamilton that have been started won't be finished any time soon; Canadian construction workers will be leaving in large numbers; the insurance industry, in general, looks to be in for an excellent couple of years if the hedge funds survive; retail doesn't look too great; and the Government sector will continue to boom as if nothing had happened, thank goodness.

Having started by lambasting politicians, why would I support a Bermuda Government that will keep hiring and spending, and spending and hiring, as if it were 1966 all over again?

Because in Bermuda, the Government fulfils functions not required in most countries. Start with the basic premise: the Bermuda Government employs thousands of people to produce nothing of value.

If it did not, these people would be in the general workforce, where workers are required to produce, and can be fired if they don't.

The Bermuda model simply wouldn't work unless the people who are content to do nothing were not given money for doing nothing. The Government makes it possible for hard workers to get ahead by taking out of the game all those who don't much feel like contributing.

This, of course, is Browncesceau's dream, a world in which everyone is employed by him, but no one does anything.

Then and only then would the desire of Karl Marx for an egalitarian society be achieved (if you don't count Browncesceau and his colleagues stuffing themselves with caviar).

And in closing I must offer words of encouragement to Dr. Ewart Brown and his colleagues in the Bermuda Government.

Although nominally committed to introducing the ideas of the 1960s in little old Bermuda, they have steadfastly refused to do anything like that, governing instead as if they were the British Tory Party of the 1850s. We can only be deeply grateful for that.


Jacques Cheminade and Christian de Boissieu debate NBW on TV France 24's `Face Off'

Executive Intelligence Review

Oct. 18, 2008

Oct. 18, 2008 (EIRNS)--The broadcast aired directly in English at noon on October 17, 2008, on France 24's English-language program `Face Off,' and will be posted on the TV station's Internet site all during Saturday, when French President Sarkozy will be meeting his U.S. counterpart, Bush.


Anchorman of France 24: Hello and welcome to face-off on France 24. Europe wants an overhaul of the world's financial order. At the EU summit in Brussels this week leaders called for more transparency and regulation of global markets. That means in effect a rethink of Bretton Woods, the 1944 conference that created the rules of modern day capitalism.

Representing the European Union, French President Nicolas Sarkozy is to meet his US counterpart, George W. Bush, on Saturday to flesh out this idea. There are also plans for a summit in an expanded G8 format to push for it. So, what could Bretton Woods II look like and who actually needs it? Let's ask our guests, Christian de Boissieu, who is the president of the Economics Analysis Council which advises the French Prime Minister, and also with me, Jacques Cheminade, the president of the Solidarity and Progress association. Good morning.

F24: Jacques, I like to start with you. This is going to be a difficult sell for Nicolas Sarkozy in Camp David, isnt it?

JC: He's helped by the situation. You know that Joseph Stiglitz said, and this is a quote: "The Wall Street crisis is to the markets what has been the fall of the Berlin wall to Communism." So it's an issue of life and death.

CDB: I think the same in the sense that this crisis is global, and to a global crisis we need some global solution. To come back to the title of this broadcast, I would say that what is important for me is 'new:' it is not Bretton Woods, it is the new Bretton Woods, because in my mind this worldwide conference is going to be very different from the first Bretton Woods which was about exchange rates; which was about monetary cooperation; which was about how to finance external deficits. And now the topics with which we have to deal are totally different. We don't have to rebuild from scratch, we have to improve the system in regard of banking and financial regulation.

F24: Well, [we'll] explore that in detail in a minute. On the question of America: does the US actually need a New Bretton Woods, when it actually exemplifies, it embodies Bretton Woods?

CDB: My view is that the US economy and the US banking and financial system are in such a bad situation that they actually will [accept] playing this game of further, expanded international coordination. It is going to be not only necessary for us, but also for them.

F24: Jacques, does the US need a New Bretton Woods?

JC: Oh yeah, the American people and the true American System do need a new Bretton Woods; but Wall Street and the City of London—that's another story. For example, M. Gordon Brown has said that hedge funds, off-shore markets, and tax heavens have to be regulated but you can't regulate vice if you want to produce virtue.

CDB: You know, I was plugged by these wordings by M. Brown. In the sense that not only M. Sarkozy, but also today M. Brown and some others, are advocating to hold a New Bretton Woods conference. As I said before, I think the US will play the game because they are obliged to do so. They cannot play the game of being a free rider in the current circumstances. This crisis, the subprime crisis, was coming from the US, and it has become global for all the reasons we know, and the US must participate. And I think it is also a question of global governance.

To come back to the format, I guess that this Saturday, M. Sarkozy and M. Bush will appeal for a meeting of the expanded G8 but with whom? Perhaps the G13 format with China, India, Brazil, and some other countries. I think that in the end we need to have everyone around the table

JC: Absolutely.

CDB: Everyone, all the emerging countries and the developing countries. You have today 185 member countries belonging to the IMF. Let this assembly of countries decide for us, for the world, and not only a small club of countries.

JC: France can be a catalyzer, but not an author of the new system. The New Bretton Woods, the issue of the New Bretton Woods is, either you adapt to the situation, and you try to keep the existing financial system by all kinds of tricks and regulations. Or, you go toward a new system, and that's a challenge for civilization at this point. I fully agree with M. de Boissieu on this issue; it's a challenge for civilization.

CDB: For me the menu of this possible new Bretton Woods must be twofold. First: to give a consistent answer to the entire list of questions which have been raised by this current financial crisis. This list is very long: how to improve the working of the rating agencies; how to improve transparency of information; the debate of how to implement a reasonable code of conduct for the sovereign wealth funds; the debate about the accounting standards — which is very important in respect to what we saw in the recent past.

This is the first topic: not to give piece-meal answers but a global answer to the global problem. I would say not only to improve regulation. The issue here is to ameliorate the quality of banking and financial regulation rather than the quantity. Second topic is the fact that we have to redefine the role of the IMF for the future.

F24: Jacques, could you respond on this issue of quality rather than quantity of regulation. What do you think of that?

JC: Well, if you look, at this point, at the outstanding, non-regulated, derivatives markets, it's 600,000 billion dollars. And if you look at all the interbank derivatives transactions, it was about 2 million billion to a quadrillion dollars, and probably more. So we have a tremendous problem in front of us: you have a pyramid of illegitimate and unpayable debts. So either you apply triage on this illegitimate and unpayable debt, or you apply triage on the people and the economy; and that's the choice!

CDB: Jacques, may I say that you're talking in fact about what is called the Over The Counter (OTC) market, which could create some systemic risk. We have to better articulate the organized market with the OTC market, and I agree with you to re-regulate somewhat a part of the OTC market and to extend also the perimeter of financial regulation to bodies and institutions which are today totally out of the system.

JC: I would say, as a politician, a dirty word: bankruptcy reorganization. What you do to a bankrupt firm? You put it into bankruptcy reorganization, and you try to establish the conditions under which firms continue to function for the economy. It should be the same for the international economic system. At this point, the money went away from true long-term real investment, away from what's good for the people and the economy, and went into money making money. This process started with the big bang of the City of London, initially in 1986, and before that, by the decoupling of the dollar from gold on August 15, 1971. That's the issue.

CDB: When I said that the current topic [for the NBW] is not the exchange rate, as different from the original 1944 Bretton Woods conference, I think that at some point, we will rediscover the exchange rates problems. But now, in the short run, topic number one has to be financial regulation.

JC: But you can't revive a corpse with electro-shocks. You have to rebuild something that works, and it doesn't necessarily mean throwing everything in the [paper] basket. It means to regulate in a true way, and that means to check all the derivatives markets, and throw away everything having to do with mere bets as opposed of functioning as insurance. Derivatives based on insurance of tangible assets should be maintained, but all the rest should be thrown away.

CDB: To come back to the issue I raised when I talked about quality rather than mere quantity of regulation. If one looks back to the history of securitization, over the past fifteen, or past ten years, one realizes that in most cases, securitization was introduced by banks and their customers in order to circumvent some banking regulation.

JC: Absolutely.

CDB: And therefore, when we design the future financial system, we have to keep in mind that there is a dialectic between regulation and innovation. And therefore, we will have to improve Basel II, the solvency rules for the banks; we will have to look at the solvency and liquidity rules of insurance companies and also liquidity rules for the banks.

F24: Who is going to provide the regulations? You mentioned the IMF earlier, that it needs be a new actor, a new leader? Is that a realistic option that it could provide the oversight?

CDB: My proposal is that the IMF could co-manage, co-manage the future systemic banking and financial crisis. When I say co-manage, it means manage with the central banks, because the IMF is not going to become a true central bank and manage with the governments. And therefore, we have to give some regulatory powers to the IMF —which is not the case today— which will be exercised with the national authorities, co-managed.

F24: What do you think of that, of a system of co-regulation?

JC: The same people that are responsible for the mess in which we are, cannot be called upon to solve it. And I am very doubtful when I see Alan Greenspan as special advisor to M. Gordon Brown in England; when I see Michel Camdessus, the former head of the IMF, called upon to lead the French agency to refinance the banks in France, and worse, since that is a conflict of interest. I'm shocked and really furious when I see Henry Paulson calling M. Neel Kashkari, who's from Goldman Sachs, to rule over the 700 billion dollars of the Paulson plan! I would say, if I can make a joke: No Sachs next night! No more Sachs!

CDB: This is a different point than the one I was making.

JC: Yes, You are an expert and I am a politician.

CDB: In my view, I want to avoid any kind of conflict of interest.

JC: Good!

CDB: The debate about if we have to give some regulatory powers to the IMF which could be exercised jointly with the national authorities, this is an important question. And it is also a political question.

F24: But who should then provide the oversight, if it's not the people who, in your view, are responsible for the mess?

JC: Well, I have been calling for a New Bretton Woods since years and years, and my American friend Lyndon LaRouche also has called for a New Bretton Woods, and we denounced derivatives right at their beginning. He denounced them in 1993, whereas George Soros, who is now talking and talking, created the derivatives and created the hedge funds. So, that's what I meant when I said that those responsible for the crisis should not be put in a position to speak, and speak about how to solve it. The doctor that made the good diagnosis should be one that should be in charge of curing the patient.

F24: I'm sorry we have to end here, so Christian can't even have the last word since we ran out of time. Thank you, etc.


EU call for global financial regulation masks intra-European and international tensions

By Chris Marsden

World Socialist Website

17 October 2008

The European Union on Wednesday issued a call for a summit of the major economies to design a new system of global financial regulation, which EU leaders are calling “Bretton Woods II.”

Following a two-day meeting of EU leaders, German Chancellor Angela Merkel declared, “We should have a meeting this year, preferably in November, of the heads of state and government of the G8 countries and the emerging markets to rethink the world’s financial system and prevent any repetition of such things.”

But despite the unity of the EU leaders behind the call for a “new Bretton Woods” and a global trade deal, the meeting in Brussels provided further evidence of the perplexity and impotence of Europe’s leaders in the face of the plunge of the global economy into recession.

The EU summit confirmed the plans of the European powers to bail out their major banks at taxpayer expense, approving the €2.7 trillion rescue package initially agreed in Paris last Sunday. “The whole of Europe, without exception, approves the plan agreed on Sunday,” said French President Nicolas Sarkozy, whose country holds the rotating EU presidency.

But these measures and similar initiatives by the United States have already failed to restore confidence in the markets. With growing evidence that the world economy is contracting and announcements of factory closures and rising unemployment, the EU summit met against a background of further major falls in share prices on European and Asian bourses. Its final day saw falls of between 5 and 11 percent in Europe, with Britain’s FTSE index closing at its lowest level in five years, France’s CAC 40 down 5.9 percent, Germany’s DAX down 4.9 percent and Tokyo suffering its biggest one-day loss since 1987.

EU leaders within the euro-zone agreed to set up a financial crisis management unit to share sensitive financial information and seek a common response to the ongoing crisis. However, the EU summit failed to agree a unified plan to revive Europe’s economies, and there was no discussion of measures to provide relief for tens of millions of workers who will be devastated by a severe recession.

Statements were made expressing concern about the “negative impact on real economies” by Danish Prime Minister Anders Fogh Rasmussen, while Sarkozy said, “We would be lying if we said we weren’t looking at what is happening on the stock markets.” But restoring confidence to financial markets was deemed to be the key to bolstering Europe’s economy, a theme that was stressed by Britain’s prime minister, Gordon Brown.

With the cost of “restoring confidence” climbing to trillions of dollars, what is actually on the agenda are tax hikes, mass layoffs and cuts in public spending. The relaxing of the EU’s fiscal rules restricting budget deficits to 3 percent of gross domestic product (GDP) will be used to funnel finance to the banks in order that they can compete against their US and Asian rivals, not to alleviate the suffering of working people. Officials say that budget deficits will be allowed to exceed this limit by “several decimal points.”

Any moves toward subsidising industry will have the same purpose—to bolster Europe’s competitive position in relation to its American and Asian rivals. Responding to the US government’s $25 billion loan guarantee to American-based automakers, Luxembourg’s Jean-Claude Juncker said, “If the Americans massively support their car industry, Europe cannot not react.” Within the EU itself, the financial crisis has intensified national divisions, threatening to undermine the foundations of European monetary unity. The claims that Europe has spearheaded a coordinated international response to the crisis are empty. In reality, governments have carried out unilateral actions to prop up their national banking systems, with each such move forcing the hand of the other governments to follow suit, for fear of a flight of capital to those countries offering the most generous guarantees to their banks.

The response of the United States to the EU summit’s call for a new global regulatory framework was decidedly cool. “We will have an opportunity to discuss these—and the ideas of others—at the appropriate time,” said White House spokesman Tony Fratto.

Within the framework of the general principles agreed by the EU, moreover, each national government retains full latitude to act as it sees fit to prop up the banks based within its own borders, undercutting the banks of other countries.

In this struggle over control of dwindling financial resources, the bigger countries will naturally have a massive advantage over the smaller ones, which will not be bailed out by the EU. Germany and Britain have both made clear that they will not countenance the continuation of the subsidies that have hitherto been the bedrock of the EU project.

That is why, even prior to the summit, there was open speculation in financial journals regarding the continued viability of the euro currency and of the EU itself. Ambrose Evans-Pritchard wrote in the Daily Telegraph, “We have reached the watershed moment when Germany has to decide whether to put its full sovereign weight behind the [European Monetary Union] project or reveal that it is not prepared to do so in a crisis.... This is a very dangerous set of circumstances for monetary union. Will we still have a 15-member euro by Christmas?”

Writing for the Associated Press, William J. Kole warned that “If the EU can’t forge a common response to a collapse that transcends borders, involves multinational lenders and has pushed the euro currency down to its lowest level in a year, some wonder: What’s the point of having an EU?”

Wolfgang Munchau in the Financial Times noted, “For Europe, this is more than just a banking crisis. Unlike in the US, it could develop into a monetary regime crisis. A systemic banking crisis is one of those few conceivable shocks with the potential to destroy Europe’s monetary union.”

Bretton Woods II

Financial breakdown, global recession and growing fault-lines within the foundations of the EU form the context within which the viability of European proposals for an overhaul of the world’s financial system must be judged.

Prime Minister Brown and President Sarkozy are both claiming credit for urging the establishment of a new world system of financial governance and regulation. But aside from rhetoric and proposals for a shared set of governing principles, neither has articulated a substantive plan.

Brown, stressing that “Global financial markets present challenges that no one nation can solve in isolation,” urged the adoption of a four-point agenda to “strengthen global cooperation and build a new global financial architecture for the years ahead—a new Bretton Woods, which recognizes the globalization of financial risk in the responsibilities of global institutions.”

His four points consist of “a global early warning system” to deal with future financial crises, “globally accepted standards of supervision and regulation,” “cross-border supervision” of the 30 largest banks and insurance companies, and “cooperation and concerted action” at a time of crisis.

He has called for reform of the World Bank, for the IMF to be rebuilt as “fit for purpose” and for other national regulators to work more closely together.

His proposals are to be put for discussion at the forthcoming G8 summit to be held either in November or December, which he wants extended to include China and India, which are expected, in return for their inclusion, to foot part of the bill for future economic crises.

Brown’s schema and his talk of a “Bretton Woods II” ignore the vast changes that have occurred in world economy over the past half-century.

The system of financial regulation established at the 1944 conference of allied powers in Bretton Woods, New Hampshire was forged under the financial hegemony of the United States. Conceived of as a means of ensuring against a return to the Depression of the 1930s and the unbridled economic conflicts between nations that had led to the Second World War, it proceeded from the vast and unrivalled economic resources and industrial might of American capitalism.

Under conditions of the wartime devastation of European and Japanese capitalism, the United States was in a position to sponsor the reconstruction of world capitalism, on terms favourable to its own interests. This was epitomised by the establishment of the dollar as the world reserve and trading currency, backed by gold.

Bretton Woods was an attempt to overcome the general historical decline of the world capitalist system on the basis of the strength and dominance of the US as the most powerful capitalist nation. However, in rescuing Europe and Japan in order to ensure the markets on which its industry relied, the US inevitably set in motion processes that undermined its own economic supremacy.

By 1971, the decline in the relative position of the United States in the world economy was expressed in America’s inability to back its pledge to redeem dollars at the fixed rate of $35 per ounce of gold. The US removed the gold backing from the dollar, and the Bretton Woods system collapsed.

In the ensuing decades, the US bourgeoisie sought to overcome its economic decline by turning to ever more grotesque forms of economic parasitism and speculation. Today, the industrial decline of the US and its transformation from the world’s leading creditor to its largest debtor means that, rather than being in a position to rescue the world capitalist system, the US is dragging its economic rivals into the abyss.

Neither can the role previously played by the US be assumed by a coalition of European powers. Not only have they travelled the same route as Wall Street into speculation almost entirely removed from the creation of real value, but they are also incapable of overcoming the national antagonisms unleashed by the economic crisis.

As for China, its economy has proved to be tied more than any other to crisis-ridden US capitalism, holding the bulk of America’s debts and relying heavily on the American market for the export of its manufactured goods. Its financial markets have lost fully two-thirds of their value since October last year.


Plea to safeguard free trade

By Peggy Hollinger

Financial Times

October 17, 2008

Leaders of the international business community urged politicians on Friday not to abandon the free market as the world’s governments seek to resolve the problems that created the global financial crisis.

The heads of business federations from France, Germany, the UK, the US and Italy met in Paris to hammer out a common response to the crisis ahead of the summit on Saturday in the US between José Manuel Barroso, the European Commission president, and Nicolas Sarkozy, the president of France, and George W. Bush, the US president.

Officials said the business leaders also wanted to make their voices heard because the US meeting would focus on a wholesale redesign of the world’s financial architecture, including broader powers for the International Monetary Fund.

Signalling fears that governments will be tempted to over-regulate, and even shift into protectionism, the business leaders defended free trade and a global market economy as the sole means to ensure economic growth.

“Although the market economy is messy and sometimes extravagant, we know it is by far the best system we have for allocating resources around the world and raising prosperity,” said Richard Lambert, the head of the CBI, the UK employers’ group.

Laurence Parisot, head of Medef, France’s employers’ union, said: “History shows that growth comes from free trade, from giving space to people to innovate. We must not weaken our companies. What happened was not the fault of a liberal market, which needs rules. It was an absence of rules.”

They reiterated their support for the government plans launched this month designed to stabilise the global banking system, but said these must remain limited. “It must only be a temporary participation in financial markets,” said Emma Marcegaglia, the head of Italy’s Confindustria.

Mr Lambert said a “firewall had been put up around these troubles and there are signs that the medicine is starting to work”.

Mr Lambert gave his backing for reform of the IMF. “Certainly it is odd that in a drama like this could happen and the IMF does not have a role. We need to ask ourselves whether the IMF could play a more active role.” Jürgen Thumann, of Germany’s BDI said it was good news the US was “now open and ready for discussion” on a new approach to economic government.

But Donald Shepard of the US Chamber of Commerce warned against new agencies. “It would be a mistake to have a knee-jerk reaction,” he said. “But it does make sense to look at the way we deal with things from a regulatory standpoint.”

Over-regulation or any attempt to increase taxes on companies to fund rescue plans would simply exacerbate the adverse economic consequences, said Ms Parisot. “Today we are in recession; perhaps not in an academic sense, but the companies in all our countries are cutting staff, reducing investment and questioning research spending. We are at a very low point in the economic cycle.”

Business leaders also called on governments to ensure the global banking system did not retreat into a risk-averse mentality.


French business leader warns on over-regulation

By Peggy Hollinger

Financial Times

Oct 17 2008

Governments must resist the temptation to over-regulate in their search for a response to the problems that have created the current financial and economic crisis, warned Laurence Parisot, head of Medef, France's powerful employers' union.

Speaking to the Financial Times ahead of a meeting on Friday of business leaders from the UK, US, Germany and Italy, Ms Parisot warned that a shift away from a liberalised free market could create serious adverse consequences for the global economy.

"History shows that growth comes from free trade, from giving space to people to innovate. We must not weaken our companies. What happened was not the fault of a liberal market, which needs rules. It was an absence of rules (that is to blame)," she said.

Friday's meeting seeks to hammer out a common response to the crisis ahead of the summit on Saturday between European Commission President José Manuel Barroso, Pesident Nicolas Sarkozy of France and President George W Bush of the US.

The business leaders hope to reinforce the message that a recovery from the resulting global slowdown can only be achieved if companies are allowed to flourish. Over regulation or any attempt to increase the tax burden on companies to fund rescue plans would simply exacerbate the adverse economic consequences, said Ms Parisot. "Today we are in recession; perhaps not in an academic sense, but the companies in all our countries are cutting staff, reducing investment and questioning research spending. We are at a very low point in the economic cycle."

The business leaders are also expected to urge governments to ensure that the global banking system does not retreat into a totally risk-averse mentality which could penalise in particular small and medium sized companies. Borrowing costs must remain reasonable, even if it is understandable that they should rise, Ms Parisot said.

"Now that banks have the guarantees, they have to play the game," she said. "They have to do everything to irrigate the economy ... and conditions have to remain acceptable." The governments were right to launch their rescue packages but "it has to be a win win situation."


Bush: successor must overhaul financial rules

Agence France Presse

Oct. 17, 2008

US President George W. Bush has warned the economic rescue plan is "going to take a while" to bear fruit, and that it is up to his successor, Barack Obama or John McCain, to overhaul US financial rules.

US President George W. Bush said Friday that "it's going to take a while" for his economic rescue plan to bear fruit and charged his successor with carrying out an overhaul of US financial rules.

"The actions will take more time to have their full impact. It took a while for the credit system to freeze up; it's going to take a while for the credit system to thaw," he said in a speech to the US Chamber of Commerce.

With just 18 days before the November 4 elections, Bush said whoever enters the White House in late January will have to "ensure that this situation never happens again" by updating US regulations on banking. Citing US Treasury Secretary Henry Paulson's overhaul proposal and "good suggestions" from others, Bush declared: "Enacting these ideas into law must be a top priority for the next president and the next Congress."

Amid deep unease over the US government buying stakes in US banks -- notably on the right flank of his Republican party -- Bush defended the move as a "last resort" and denied that he had taken "a step toward nationalizing banks." "This is simply not the case. This program is designed with strong protections to ensure the government's involvement in individual banks is limited in size, limited in scope, and limited in duration," he said.

At the same time, Bush said he had taken "systematic and aggressive measures" and that "they're big enough and bold enough to work, and the American people can be confident they will."

Bush's speech came one day before he was to host French President Nicolas Sarkozy and European Commission chief Jose Manuel Barroso at his Camp David retreat for talks on the global financial meltdown. The US president has signed on to a proposal from Sarkozy, whose country holds the rotating European Union presidency, to hold an emergency summit of world leaders -- a gathering now expected in late November.

Bush made no explicit reference to Sarkozy's call for a top-to-bottom overhaul of international financial regulations but said that "our 21st century global economy continues to be regulated by laws written in the 20th century." "Our European partners are taking bold steps. They show the world that we're determined to overcome this challenge together. And they have the full support of the United States," Bush said.

After he spoke, Wall Street shares fell at the opening as a weak report on US housing starts prompted profit-taking a day after a powerful rally. The Dow Jones Industrial Average fell 222.94 points (2.48 percent) to 8,756.32 in the first exchanges a day after a dramatic rebound lifted the blue-chip index more than 400 points. Market action came as a report showed construction starts on new US homes slumped an additional 6.3 percent in September to the lowest level since the recession in 1991.

The White House said Thursday it was too soon to say where and when world leaders might hold talks later this year or whether US presidential hopefuls would take part, and played down expectations for the Camp David talks. "I wouldn't expect a lot out of it. I don't expect any new policy announcements. I don't expect dates for meetings to be announced," said spokeswoman Dana Perino.

"I think that it will just be a chance for them to continue the discussions that they've been having since the beginning" of the crisis, she said.


Seeking an end to the madness - Europe's leaders want to see a new global financial system emerge

The Economist

Oct. 16, 2008

IT COULD have been worse. That was the message from European Union (EU) leaders as they emerged from a long-planned two-day summit in Brussels on Thursday October 16th. In today’s desperate times, the avoidance of catastrophe counts as an achievement.

The financial crisis is concentrating minds. European unity held, as leaders from all 27 countries in the union endorsed a €2 trillion ($2.7 trillion) rescue plan for banks that had been agreed by the countries that use the single currency, plus Britain, at a meeting in Paris on Sunday.

The plan amounts to a set of agreed guidelines for co-ordinated action. That falls short of the grand claims made for it by some, notably the summit host, President Nicolas Sarkozy of France.

He said that it marked the birth of a “European economic government”. It does represent a step on from the damaging cacophony that reigned beforehand, in which European governments announced beggar-thy-neighbour schemes to guarantee deposits in their local banks.

Other grandiose claims swirled. For the first time “in history”, Mr Sarkozy told his colleagues, plans drawn up by the EU had “inspired the measures taken in other countries of the world, including the United States.” Europe “demanded” a global summit to discuss the creation of a new form of capitalism, based on moral values, and the effective regulation and supervision of all corners of the financial world, including hedge funds and rating agencies, said Mr Sarkozy.

The French leader and the European Commission president, José Manuel Barroso, will meet President George Bush at Camp David on Saturday, to discuss the agenda for that global summit, described as the starting point for a new “Bretton Woods”, after the 1944 meeting of Western leaders that led to the foundation of the World Bank and the International Monetary Fund.

The summit should take place in New York, “where everything began”, suggested Mr Sarkozy, making one more swipe at the excesses of Wall Street. It would probably happen in November or December, with the American president-elect invited to send representatives to join Mr Bush, said the French president.

Telling differences of tone existed beneath the brave talk of unity. Mr Sarkozy talked of a “new” sort of capitalism which would serve business and people. France wants to see tough measures against the “madness” of executive pay and bonuses that encouraged risk-taking, as well as a clampdown on tax havens. Other leaders, such as Jean-Claude Juncker of Luxembourg, backed proposals to support important industrial sectors, such as European carmakers, and not just banks.

Britain’s prime minister, Gordon Brown, arrived clutching a sober, seven-page plan for fixing the existing machinery of free market capitalism. The world needs more transparency, integrity and systems of global governance, he argues. He wants to see cross-border “colleges” of national supervisors to assume oversight of the 30 largest financial institutions in the world, by the end of the year, and to see the IMF become an “early warning system” for problems looming in the world economy. The summit conclusions did not take up his call for world leaders to agree a free-trade deal urgently, to send a signal that the crisis would not lead to a dangerous lurch back to protectionism.

The other achievement in Brussels also centred on avoiding a disaster. All 27 countries confirmed their “determination” to stick with ambitious targets for fighting climate change, agreed amid much self-congratulation in March 2007. By the year 2020, those targets would see EU members cutting carbon emissions by 20% compared with 1990 levels; they should also derive 20% of energy from renewable sources. Preserving those targets was a close-run thing. In the words of the British foreign secretary, David Miliband, several countries were suffering from “buyers’ remorse”, after their bold promises of 18 months ago.

Italy’s prime minister, Silvio Berlusconi suggested that EU measures to curb carbon emissions should be postponed until after the financial crisis. Eight ex-communist countries suggested that the current plan for cutting emissions would cause them unbearable economic pain. In the end, the swing vote came from Angela Merkel, the German chancellor, who stared down intense lobbying from German industry to say she still supported the climate change package. The issue now passes to (yet another) EU meeting in December. Whether unity can hold until then may depend on whether a deep recession has Europe in its grip.


EU leaders push for finance overhaul at summit

Agence France Presse

Oct. 15, 2008

BRUSSELS (AFP) — European Union leaders pushed for rapid moves to overhaul global finance, demanding a world summit be convened for a complete rethink of the system in the wake of the banking crisis.

Announcing that all 27 of the EU's leaders were behind measures taken by members of the single currency eurozone to safeguard banks, French President Nicolas Sarkozy said Wednesday there was also a unanimous demand for a world summit to be held by the end of the year on reforming global financial institutions.

"Everyone agrees on the need for a global summit soon," said Sarkozy whose country currently holds the revolving EU presidency.

"We want this summit to take place before the end of the year and we think that November is a good time," he added.

Sarkozy had earlier told his peers that the turmoil in the financial system, which has seen stock exchanges plummet in recent weeks, was "one crisis too many".

"The system must be completely overhauled, an overhaul that must be global," he said.

"A new capitalism is needed, based on values which put finance at the service of business and citizens, and not vice versa."

The call from Sarkozy, who is to travel to the United States this weekend for talks with President George W. Bush on the recent turmoil, were echoed by British Prime Minister Gordon Brown who said that a crisis was being witnessed "that has the potential to affect every country around the world."

"The challenge for the international community is to stabilise current market conditions, mitigate and manage the risk of contagion to other parts of the globe and reform the international financial system for the future," Brown added, according to a copy of a speech that was delivered behind closed doors.

Brown said in particular that an "early warning system" needed to be set up to avoid a repeat of the recent turmoil and that the International Monetary Fund needed to be made "fit for purpose."

Buoyed by the initial positive reaction of markets to bank rescue packages in the eurozone, leaders gathered in Brussels hoped it would mark the start of a more coordinated approach to a crisis many say stems from the United States.

The eurozone leaders last weekend agreed a comprehensive package designed to shore up banks, including making more than a trillion euros available for interbank loans.

Sarkozy said that there had been overwhelming support for the package from the other EU leaders who do not use the euro.

"The whole of Europe, without exception, approves the measures adopted on Sunday in Paris," he said.

However he added that the EU nations have still not reached a definitive agreement on the text which contains the measures, amid some reservations over state intervention from the Czech government.

Speaking alongside Sarkozy, EU Commission chief Jose Manuel Barroso said it was essential that Europe and the United States work in tandem to address the root causes of the banking crisis.

"Europe is indispensable for a global response but a European response alone is not enough," he said.

The summit began amid the release of more grim economic data from the EU's two biggest economies with unemployment in Britain jumping to an eight-year high of 5.7 percent while Chancellor Angela Merkel said Germany's economy was heading for a slowdown, albeit a transitory one.

Before the financial crisis reared its head, EU leaders were to have focused at the summit on Europe's efforts to tackle climate change.

As the summit evolved, splits over climate change goals widened with first Poland and then Italy threatening to veto plans to tackle the issue if attempts were made to impose a deal.

Last year the European Union adopted the target of reducing greenhouse gas emissions by 20 percent by 2020 from 1990 levels.


Brown Seeks Global `Early Warning' System on Crises (Update4)

By James G. Neuger and Mark Deen

Bloomberg News

Oct. 15, 2008

Oct. 15 (Bloomberg) -- U.K. Prime Minister Gordon Brown called for an overhaul of global financial regulation and an ``early warning'' system to prevent banking crises, setting up a trans-Atlantic clash over world economic management.

Brown, author of the British bank-bailout plan that was copied across Europe and in the U.S., urged a strengthening of the International Monetary Fund and better monitoring of global companies and banks.

``We now have global financial markets, but what we do not have is anything other than national and regional regulation and supervision,'' Brown told a Brussels press conference today before a two-day European Union summit.

Brown's call, echoed by other EU leaders in the wake of the biggest stock-market selloff since 1933, is likely to face headwinds from the U.S., which has enjoyed a dominant role in international financial institutions since the current rules were set at the end of World War II.

``The U.S. got what it wanted in 1944 and, I suspect, will do so again simply because the Europeans won't be able to decide what they want,'' said Martin Weale, director of the National Institute of Economic and Social Research in London.

At Bretton Woods, New Hampshire, in 1944, nations agreed to fix exchange rates, establish the IMF and start the process of Europe's postwar reconstruction by encouraging coordinated economic policies.

Top 30 Banks

Brown said national regulators must coordinate their work and banks should be pushed to disclose more trading positions. He called for an end-of-year deadline to place each of the world's top 30 banks under the supervision of a panel of regulators from the countries where it is active.

French President Nicolas Sarkozy called for regulating rating companies and ``necessary supervision'' for hedge funds.

``The role of public players needs to be reconsidered. I would propose a simple principle, that no financial institution should escape regulation and supervision,'' Sarkozy said in a statement distributed by his press service at the EU summit today.

While stressing a global approach, European governments are split over how to go about it, with leading countries -- including Brown's Britain -- traditionally opposed to handing over business regulation to outside authorities.

European leaders are pressing for a jumbo summit of the Group of Eight industrial nations plus developing countries including China and India to rework global financial rules and management of the IMF. Brown and Sarkozy said that summit should take place before the end of the year. Sarkozy said it should be held ``preferably in New York where everything began.''

Global Economy

``Now we have to create the institutions that are relevant not for national and sheltered economies, but are relevant for the global economy,'' Brown said.

To jumpstart that process, Sarkozy, holder of the EU's six- month presidency, will travel with European Commission President Jose Barroso to the U.S. on Oct. 18 to meet President George W. Bush.

EU governments initially reacted to the crisis in a ``piecemeal and ad hoc'' fashion, ``creating an impression of disorder and sending confused signals to financial markets,'' aides to Barroso said in a paper prepared last week and released yesterday.

In the meantime, European leaders have committed as much as $2 trillion to guarantee interbank lending and buy stakes in banks, to prevent hobbled credit markets from tipping the broader economy into recession.

U.S. Follows Suit

The U.S. followed suit yesterday, announcing an unprecedented $250 billion government investment in banks, starting with nine institutions deemed critical to the survival of the system.

European Central Bank President Jean-Claude Trichet said a reshaped world financial system should try to restore the ``discipline'' that governed markets in the decades after World War II.

``Perhaps what we need is to go back to the first Bretton Woods, to go back to discipline,'' Trichet said after giving a speech at the Economic Club of New York yesterday. ``It's absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline.''

Trichet indicated that recent market turmoil was partly a consequence of the deregulation that occurred after Bretton Woods' demise. That was triggered in 1971, when inflation forced the U.S. to abandon the dollar's peg to gold, an anchor of the system, heralding the era of floating exchange rates.

`Rejection of Discipline'

``The explosion of the first Bretton Woods in a way could be interpreted as a rejection of discipline,'' said Trichet.

German Chancellor Angela Merkel told parliament in Berlin today that her government wanted ``a strengthened role for the IMF for keeping tabs'' on global financial institutions.

Trichet and U.S. Federal Reserve Chairman Ben S. Bernanke are struggling to restore order to credit markets after the collapse of Lehman Brothers Holdings Inc. and $640 billion in writedowns make banks reluctant to lend. The ECB and the Fed last week cut interest rates in tandem and this week agreed to flood the financial system with dollars.

``Creating stability by adapting frameworks that have worked historically can improve credibility and hence the effectiveness of policy stabilization measures,'' said Lena Komileva, an economist at Tullett Prebon Plc in London. ``This idea may gain traction with policy makers.''


EU in push for world finance summit: Sarkozy


12 October 2008, 23:30 CET

(PARIS) - The European Union will ask the United States to jointly organise an international summit to reform the global finance system, French President Nicolas Sarkozy said Sunday after talks with EU leaders.

After agreeing on a bank rescue plan, Sarkozy said Europe must now join the United States and other powers to address the root causes of the banking crisis that has seriously rattled stock markets.

"We must convince our American friends of the necessity of an international summit to review the international financial system," said Sarkozy.

"We in Europe are not ready to let this go on in this fashion."

The president first proposed holding the world summit in an address to the United Nations last month, saying that the gathering would lay the groundwork for more state regulation to replace the laissez-faire market approach.

Sarkozy is hoping to organise the gathering in November to bring together leaders of the Group of Eight club of industrial nations along with emerging powers Brazil, China and India.

On Sunday, he said that once the fires of the financial crisis had been doused, governments and regulators would take a closer look at the situation to determine who might be held to account for the meltdown.

"Some officials will have to assume their responsibilities," he said.

"There will be reviews and changes. For the time being, we are trying to manage the crisis, to pull out of the crisis and to restore confidence."

Leaders of the 15-nation eurozone single currency bloc agreed Sunday on a joint plan to confront the banking crisis, hoping to avert further massive losses on the stock markets.

Summit of the euro area countries: declaration on a concerted European action plan of the euro area countries



By Ignazio Angeloni

Bruegel Essay and Lecture Series

Oct. 2008

...[T]he world is not suffering from excessive financial globalisation but from insufficient regulatory globalisation. (Foreword at p. 3)

...In this essay I look at the crisis from a different perspective, that of its possible consequences for the governance of global financial markets. (p. 7)

...First, in today’s global financial policy architecture, the quantum of cooperation among national and supranational financial authorities (information exchange, prior consultation, common decision making, etc.) is less that would be desirable. There is a growing conflict between the degree of globalisation reached by today’s financial markets and the national bias that still dominates financial regulation and supervision.

Second, the current turmoil deepens this conflict, calling for yet more coordination of financial policies if not their delegation, in part, to supranational institutions. This is most evident in relation to banking supervision on large cross-border financial conglomerates.

Finally, I argue that one consequence of this crisis may indeed consist of precisely this outcome, namely a move towards closer coordination at the global level. Historically, crisis situations have often been catalysts or accelerators of institutional change. The role assumed over the last year by the Financial Stability Forum (FSF) in stimulating and coordinating the regulatory response of all major global financial authorities hints at this; the urgency of the situation and the necessity to act jointly seem to have overcome the elements of resistance that had hampered the Forum’s action in previous years. (p. 8)

...In October [2007], two months after the onset of the crisis, the G7 ministers and governors meeting in Washington for the IMF/World bank annual meetings asked the FSF to ‘undertake an analysis of the causes and weaknesses that have produced the turmoil and to set out recommendations for increasing the resilience of markets and institutions going forward’,and to report back to the G7 at the spring meetings (April 2008). (p. 26)

The report presented in April 2008 at the Washington meetings...was comprehensive and ambitious in several ways. The bottom line is a sequence of some 65 detailed policy actions, to be undertaken by national authorities, international bodies, the private sector and the FSF itself, by a tight deadline. They are divided into five areas:

1. Strengthening prudential instruments (capital provision, liquiditymanagement, risk controls);

2. Enhancing market information (transparency and valuationprocedures);

3. Reforming credit rating (both their provision and use);

4. Enhancing the authorities’ response to risks;

5. New arrangements to respond to stress situations. (p. 27)

...These recommendations add up to a programme for reform of a large part of the global financial system...The document clearly signals that the FSF, in which most of them are represented, is to coordinate their action and embodies their regulatory and supervisory power. The document also contains a broad range of initiatives to be undertaken by international organisations, specialised supervisory groups (such as BCBS and IOSCO), standard-setters as well as the private sector. In terms of breadth of coverage, the ability to bring together input and authority from different sources and the relevance of its likely impact, the FSF report to the G7 constitutes an unprecedented act of global governance.

In an unusually long and detailed press release after its April meeting 18, the G7 endorsed the programme and set tight deadlines for its implementation – 100 days for the most urgent disclosure, accounting and liquidity and risk management changes, end 2008 for the remainingactions in the list. Importantly, the G7 has also given a mandate to the FSF to monitor the process and to ensure its timely execution.(p. 29)


While financial interdependence and the cross-border impact of domestic policies have increased in recent decades, financial market regulation and supervision remain predominantly in the national domain, with only a modest quantum of international coordination. This creates inefficiencies and risks, but the more recent crisis experience may help create a consensus for this to change. There are signs that this may already be happening. The role of the Financial Stability Forum in coordinating the regulatory response to the crisis offers an interesting new model of international cooperation. (p. 30).

The ‘FSF model’ – composed of a mix of a strong political mandate, broad sectoral and geographical representation of competent authorities and effective internal management – is proving effective and indicates what future cooperation among financial policymakers at the lobal level may look like.

...The informal arrangements that have applied during the crisis will need to be transformed into more stable structures, where coordination among regulators on crisis prevention can become the rule in normal times. This not only requires cohesion and political will but directly calls into question the role of the IMF.

...The IMF and the FSF provide complementary elements of supranational and international governance, and hence will need to cooperate, no matter how difficult this may be in practice.

In order to derive benefit from this painful experience, it is vital that protectionist instincts and the temptation to exercise indiscriminate controls be resisted. Neither the regulatory deficiencies nor the errors by market participants which are at the root of this crisis fundamentally call into question the benefits of properly functioning, open and competitive financial markets. If anything, the arguments advanced here suggest the opposite, namely that the system may have suffered from insufficient globalisation (by regulatory and supervisory authorities), not from excessive globalisation (of financial markets).(p. 31)



By Jeffry Freiden


June 2006

Fifteen years ago, in December 1991, the dissolution of the Soviet Union epitomised the end of the division of the world into separate blocs and the emergence of a truly global economy. Though the term had been coined somewhat earlier, it was at about the same time that globalisation entered the public debate. At that time, it was looked upon as a promise. Fifteen years on, however, dissatisfaction is widespread. When asked in Spring 2006 whether globalisation was a threat or an opportunity, 47% of EU citizens chose the first answer and only 37% the second. They blame international economic integration for job losses, increased economic insecurity and rising inequality. The proportion of those who regard globalisation as a threat is as high as 70% in France and Greece. In the US, fears are not identical to European ones, but while the concern about jobs is somewhat less pronounced, alarm over security is more prominent.

At the same time, the vision of a truly multilateral world in which global rules and institutions would ensure a level playing field for workers and producers from all countries, big and small, has receded...Throughout the world, and across Europe, more governments are moving away from reliance on multilateral rules to emphasise the promotion and protection of national interests.(Foreword at p. 3)

...Economists and historians have frequently emphasised the similarities between the first wave of globalisation – the one which ended with World War I – and the current one. Then as now, consumers and investors had access to products and assets from the whole world as trade and capital flows flourished. Then, as increasingly nowadays, people were also on the move in search for better economic opportunities. But what Stefan Zweig would later call “The world of yesterday” abruptly ended in 1914.

...Frieden’s main conclusion is that against the background of major adjustments, the economic rules of the XIXth century’s global economy had become incompatible with the politics of post-WWI societies...

...From his analysis, he also draws lessons for today. The main one is that whatever the benefits of free trade, persuasion alone won’t suffice. This especially applies to the US where rising inequalities, macroeconomic strains and security worries could soon interact and lead public opinion to question the country’s international economic policy.

To make worldwide economic integration politically sustainable, Frieden suggests working simultaneously at the global and national levels: he calls both for a legitimate political governance of globalisation and for domestic policies to smooth transitions and compensate those who lose in the process. (p. 4)

...Why could the first era of global capitalism not be restored? It was not for lack of trying. For twenty years after World War I ended, statesmen and diplomats engaged in round after round of conferences and consultations. The nations of the world signed treaties, created international organisations, and committed themselves to new obligations, in unprecedented measure.

Yet nothing seemed to work. The problem was not lack of technological progress...Nor was the problem necessarily slow growth.

...The underlying sources of weakness in the international economic order after 1918 were political. One problem, which has received a great deal of attention, was international political conflict. Certainly this was important. The United States was by 1918 the world’s largest and most important economy: the world’s largest trading nation, largest lender, most important financial centre and international investor. Yet the United States government, dominated by isolationists who wanted little to do with the rest of the world, withdrew from international politics after 1920. (p.11)

This was unquestionably debilitating. By the same token, the continuation in the diplomatic realm of the Franco-German rivalry that had been fought out on the battlefield was also a serious problem. (pp. 11-12)

International political problems introduced great instability into the inter-war political economy, but I would focus attention on an even more important source of conflict: domestic politics. (p.12)

...To summarise and generalise, the first age of globalisation worked because it was economically and politically feasible for governments to do what was necessary to sustain their international economic commitments. It was not restored after World War I because these enabling conditions were no longer present. Keynes drew his conclusions early on: it was, he said exceedingly dangerous “to apply the principles of an economics, which was worked out on the hypothesis of laissez-faire and free competition, to a society which is rapidly abandoning these hypotheses.” (p. 14).

Of course, many political and economic leaders continued to hew to the beliefs of an earlier day. After all, the gold-standard policies had worked before. Policymakers had learned that economies would adjust themselves, and that what governments needed to do was resist the temptation to step in. The appropriate stance was to follow the dictum: “Don’t just do something,
stand there.” (pp. 14-15).

...Whatever the intellectual justification for the classical stance, conditions had changed in ways that made it no longer economically or politically practicable. And yet, alternatives were very slow to develop, and even slower to be adopted. Keynes expressed his frustration to a member of the Bank of England’s board, accusing the Bank of “attacking the problems of the changed post-war world with... unmodified pre-war views and ideas. To close the mind to the idea of revolutionary improvements in the control of money and credit is to sow the seeds of the downfall of individualistic capitalism. Do not be the Louis XVI of the monetary revolution.”

...Despite the warnings from Keynes and others, when difficulties arose in the 1920s, and especially in the 1930s, there was initially little or no politically viable response. The result of this failure was, as we know, a terrible backlash, and one that in some sense was predictable. (p. 15)

...The ensuing backlash had some predictable properties. Supporters of the classical order had argued that giving priority to international economic ties required downplaying such concerns as social reform, nation building, and national assertion.

...[I]f the choice was between social reform and international economic integration, they would choose social reform – thus leading to the Communists’ option of radical autarky. If the choice was between national assertion and global economic integration, another set of mass movements
chose nation-building – thus leading to fascist autarky in Europe and economic nationalism in the developing world.

In fact these views – economic nationalism as applied by fascists, developmentalists, or communists – appeared to be in the ascendant all through the interwar period.

...It took quite a while for any sort of serious alternative to develop. Eventually what arose was what we think of today as the social democratic welfare state. This involved a commitment to both the market and a wellformed system of social insurance at one and the same time. Despite the somewhat suspect nature of social democratic principles in today’s environment, their rise in the 1930s and 1940s did seem to capture something inherent in modern capitalist economies. Societies dominated by big business and big labour seemed also to require big government. The result was a compromise, which started to form in the mid 1930s and gradually increased in strength and speed.

...This compromise, whether in its Scandinavian socialist, American New Deal, or several other incarnations, became the central component part of the industrialised world’s social organisation after World War II. And the Bretton Woods system that arose at the same time was an extension and expansion of this compromise to the organisation of the world economy. (pp. 16-17)

...This Bretton Woods system of compromise worked spectacularly well. Global economic integration advanced continually if gradually; government spending on a wide variety of social programmes advanced as well; and the world experienced the most rapid and most stable period of sustained economic growth in history. The extraordinary success of the Bretton Woods order actually helped undermine the very operation of the system itself. The gradual pace and compromise nature of the path to economic integration allowed an ever greater opening of markets; but the more open markets became, the more difficult it was to sustain gradualism and compromise. (p. 18)

...The first era of globalisation collapsed because there was no effective political and policy response to changing economic and social conditions. It did not fail, in my view, for technical or objective economic reasons, but rather for political-economy reasons. The major nations’ reigning social orders faced new, and newly powerful, demands, and did not satisfy them. (p. 19)

...As was the case a hundred years ago, access to international markets today provides enormous benefits. Globalisation’s contribution to economic growth and development are palpable, and are widely enjoyed. The biggest human story of the past 25 years is the integration of China and India into the world economy, and the remarkable increase in living standards of hundreds of millions of people that has resulted. Nevertheless, exposure to the international economy can impose serious costs on people, industries, regions, even whole countries. (p. 20)

...[T]he challenge is to address the legitimate concerns of those who are either losing or not gaining in the contemporary economic environment. Certainly many of the fears expressed in the political arena are exaggerated, and opportunistic politicians exploit them mercilessly; but that should not obscure the reality of the underlying socioeconomic trends that motivate these fears. (p. 21)

...There is very little remaining of the traditional business protectionism of previous eras. To be
sure, there are protectionist pressures from farm communities and industries, but these pressures are much less important politically than they have been in the past. Some of the traditionally protectionist industries have simply faded away, while others have become internationally integrated; in any case, these industrial lobbies are weaker than they have been.

In their place has come a drumbeat of broad discontent with international economic integration. This is something that is relatively new – at least in more modern America. It is reminiscent of the mass public concern of 75 or 100 years ago in the United States, when economic isolationism was the norm in American public opinion. But in recent years there has rarely been so much, and such generalised, uneasiness about America’s place in the world economy.

The state of the nation’s public opinion should be kept in mind as we look at three important trends in American society: deteriorating income distribution, macroeconomic imbalances, and concern about national security. All of them have serious implications for the political economy of America’s role in the world. (p. 22)


...[I]n the United States there is an insistent, if muffled, drumbeat of apprehension about what globalisation means for unskilled workers, and now increasingly for semi-skilled and skilled workers in the middle class. Global economic integration has clearly provided tremendous benefits to the top quarter or so of the income distribution, but there are many in the United States who are not convinced that the remainder of society has benefited. (p. 25)

...America’s fiscal stance and the capital inflow from abroad – have been central to the American
economic expansion. This capital inflow has, among other things, tended to keep the U. S. dollar stronger than it otherwise would be...The relatively strong dollar has, over the past ten years, been associated with increased...housing prices. The housing market expansion in turn has contributed to the generalised feeling of prosperity that has mitigated some of the latent dissatisfaction with trends in income distribution. For the booming housing market has had a significant wealth effect, allowing many middle-class Americans to borrow against the rising value of their real estate. These interrelationships could be developed on many dimensions, such as with how the availability of foreign funds made substantial tax cuts possible. The general point is that the current state of the American economy and of its political economy is related to the massive capital inflows.

The current imbalances are unsustainable. I do not pretend to know when they will come to an end, or how; but eventually the United States will have to reduce its fiscal deficit, and eventually the capital inflow will have to be reduced and even reversed as external liabilities are serviced. And this in turn implies a reduction in consumption, an increase in savings, and a decline in the real exchange rate of the dollar – an unwinding of what has happened in the past ten years. Any number of scenarios might follow from this; almost all the realistic ones involve a decline in the relative price of housing (as the real exchange rate declines). The resulting pressure on the mortgage market is likely to cause financial distress, which will exacerbate the general macroeconomic pressures on the middle classes.

Whatever the preferred scenario one chooses for an end to the current imbalances, the process will create strains in the American macroeconomy – and in American politics. For the mass public support for – or at least lack of open opposition to – America’s current integration into the world economy is largely due to the current boom. (p. 26)

When the expansion comes to an end, and when many of the factors that have sustained it, turn around – when the United States goes from living beyond its means to living within its means and then some – latent tensions over globalisation will almost certainly come to the fore. (pp. 26 and 28)

...This brings me to the third dimension of relevance to assessing the likely future of America’s international economic role, and that is how national security concerns interact with the politics of foreign economic policy.

It is not widely appreciated today how unpopular international economic engagement was even at the point at which the United States was leading the world toward the construction of the Bretton Woods system. In the aftermath of World War II, public opinion appeared overwhelmingly opposed to trade liberalisation, which after all had been anathema to most Americans for nearly a century.

...There seemed little prospect that the Truman Administration would be able to convince a Republican Congress, and a reluctant mass public, of the need for renewed global engagement... [T]he Truman Administration was able to secure Congressional and popular support for its international economic policies by linking them to the struggle against the Soviet Union...Many conservative Republicans in the Congress were unenthusiastic about international economic engagement – as they had always been – but believed in the need for military and political involvement in stopping the spread of Soviet-backed Communism in Europe and elsewhere. (p. 28)

...The connection between national security and international economic engagement no longer seems so obvious. If, as many would argue, the principal concern of American national security policy is the struggle against extremist Islamic terrorism, the international economic implications are less than straightforward...Others would insist that the principal security concern of the United States over the coming decades will be the rise of China. Here, too, it is hard to know how America’s current international economic policies relate to that national security challenge. (p. 29)

...Compromises between globalism and nationalism, and between social reform and markets, permitted the Western economies to grow rapidly and stably after World War II. But those compromises eroded as the world economy became ever more tightly integrated, especially after the developing countries and centrally planned economies rejoined the international economic order.

Today capitalism is at least as global as it was in the decades before 1914, which raises the spectre of a return to the failures that ended that earlier episode of global capitalism. And so the central challenge of our portion of the twenty-first century will be to avoid a repetition of past ragedies, of both sorts. We need to eschew an exaggerated reliance on market forces to solve all problems, and on the support of the beneficiaries of the global economy to address all discontent. But we also need to avoid an unwarranted turn toward economic insularity, and a simple surrender to the proponents of protection.

This will require a delicate balancing act...The first part of it is to build and sustain a functioning, integrated, international political and economic order. There will be continuing threats to this order, both from traditional opponents in the economic realm and from a great variety of non-economic forces – geopolitical, ideological, religious – that oppose a global economy as a matter of principle or expedience. Supporters of an open international economy need to work together to build an effective and stable governance structure for international economic interactions. (p. 31)

The second part of the balancing act is to create and sustain domestic political and economic conditions that allow enduring support for international commitments. This might include consultation among affected social groups, compensation for those asked to sacrifice, targeted interventions to smooth transitions, and whatever else helps maintain the social and political stability necessary for national political economies to reap the fruits of international economic integration. (pp. 30-31)


IV. European and Certain U.S. Leaders Have Called for Global Financial Governance Reforms Based on Feared Similarities Between the Causes of 19th Century Globalization and the Current Era of Globalization. Certain U.S. Leaders Also Seek to Use This Opportunity to Complete Their Long-Term 'European Experiment' Gone Awry.

[See: Eurobama Seeks Support From Green EU Social Welfare Regulatory State to 'Change' America, ITSSD Journal on Pathological Communalism, at: ].




["Indeed, Europe had long targeted the U.S. regulatory and free enterprise systems for fundamental restructuring. Its aim has all along been to achieve supranational legal and economic governance over the affairs of global (mainly U.S.) industry through an environment-centric negative paradigm of “sustainable development.” There is, in fact, significant documentary evidence showing how the European Community and a number of EU member state governments have, for many years, tried to persuade/compel American-based international businesses and their domestic and foreign suppliers, as well as U.S. federal, state, and local legislators, to adopt similar rules. In so many words, Europe has been engaged in a legalistic and economic war with the United States in an effort to reshape the post-World War II paradigm in the European image. And it has employed “soft” regulatory rather than “hard” military power to achieve this. The unfortunate reality is that Europe is now well on its way to governing the American way of life; that is, re-colonizing America and the world..."]




European Communities (2003)

On 25 July 2001 the European Commission adopted a White Paper on European Governance which has been made available to the public on the Internet (2) and has also been widely distributed as a brochure. It has been the subject of debates, seminars, articles and studies.

A public consultation was formally launched, running up until 31 March 2002 allowing members of the public to submit their comments. In its White Paper the Commission announced that, before the end of 2002, it would report on progress achieved with regard to governance initiatives and draw lessons from the public consultation. (p.5)

3. Implementing the White Paper

The White Paper on European governance set out key proposals for changes in four broad, action areas: ‘better involvement’, ‘better policies, regulation and delivery’, ‘the EU’s contribution to global governance’ and ‘refocused policies and institutions’. (p. 11)

3.3. Contribution of the EU to global governance

1. The White Paper stressed that successful governance reform at home was needed in order for the EU to make a credible case for change at global level; change to which it should be no less committed.

2. The Commission’s action in the international field is guided by compliance with the rights and principles contained in the EU Charter of Fundamental Rights proclaimed at the Nice Summit in December 2000. The Charter makes the overriding importance and relevance of fundamental rights more visible to EU citizens and will also promote coherence between the EU’s internal and external approaches.

The Commission, in 2002, adopted communications on a global partnership for sustainable development (2), on responses to the challenges of globalisation (3) and on corporate social responsibility (4). At its most visible, the EU is promoting at international level the governance principles it adheres to at home. The EU has worked towards a more inclusive globalisation agenda, seeking to ensure that market liberalisation takes place in a broader regulatory framework (WTO — Doha meeting, November 2001). It has contributed to the World Conference against Racism (Durban, August–September 2001), worked towards increasing official development assistance and stressed the need to broaden and strengthen the participation of developing countries and countries with economies in transition in international economic decision-making and norm-setting (International Conference on Financing for Development, Monterrey, March 2002) and has taken stock of and reaffirmed its commitment to the implementation of the internal and external dimensions of global sustainable development through a multidimensional approach. In this context eradicating poverty and changing unsustainable patterns of production and consumption are overarching objectives (UN World Summit on Sustainable Development — Johannesburg, August–September 2002).

The EU has also acted to ensure that no genocide, war crimes or other crimes against humanity can ever again go unpunished by welcoming the entry into force (July 2002) of the Rome Statute (5), providing for the creation of the International Criminal Court (ICC). The EU (6) confirmed its support for the early establishment and effective functioning of the ICC, as well as its determination to encourage the widest possible international support for it. The latter concern led the EU to propose the development of a broader dialogue between the European Union and the United States on the matter. It also led the EU to develop, as one of its guiding principles for Member States considering the necessity and scope of possible arrangements with the United States, to address the desirability of the US reengaging in the ICC process.

…5. On the question of how the Union can contribute to a comprehensive reform of multilateral institutions and improve cooperation, the Commission is developing a more comprehensive and strategic approach for both the Commission and the EU in its relations with the United Nations system and the Bretton Woods Institutions. The Commission is seeking to consolidate and reinforce systematic EU coordination across the UN system. It proposes progressively reinforcing EU representation in the Bretton Woods Institutions and supporting policy coherence between the UN, the WTO and the Bretton Woods Institutions.

The EU can clearly play a role in promoting cooperation between institutions on the basis of new models geared to responding to a rapidly changing world. But its role should not be limited to process building. The EU also seeks to redress inadequate participation of developing countries, which often raises the question of the legitimacy of international organisations. On the above issues, the Commission is examining the creation of a non-bureaucratic policy discussion space in order to encourage a freer exchange of views outside a formal ‘negotiating mindset’. (pp. 25-27)



COM(2001) 428 final

Commission of the European Communities

July 25, 2001


Global governance

The White Paper looks beyond Europe and contributes to the debate on global governance. The Union should seek to apply the principles of good governance to its global responsibilities. It should aim to boost the effectiveness and enforcement powers of international institutions.

The Commission will:

· Improve the dialogue with governmental and non-governmental actors of third countries when developing policy proposals with an international dimension.

· Propose a review of the Union’s international representation in order to allow it to speak more often with a single voice. (p 5).

3.3. The EU’s contribution to global governance

The proposals in the White Paper have been drawn up against the background of enlargement, but they also offer a useful contribution to global governance. The Union’s first step must be to reform governance successfully at home in order to enhance the case for change at an international level.

The objectives of peace, growth, employment and social justice pursued within the Union must also be promoted outside for them to be effectively attained at both European and global level. This responds to citizens’ expectations for a powerful Union on a world stage. Successful international action reinforces European identity and the importance of shared values within the Union.

…By acknowledging the global dimension more strongly, the Union will strengthen its voice in multilateral negotiations. It should aim to improve the effectiveness and legitimacy of global rule making, working to modernise and reform international and multi-lateral institutions in the medium to long term. The goal should be to boost the effectiveness and enforcement powers of multi-lateral institutions. In the short term, the Union should build partnerships with other countries in order to promote greater co-operation and coherence between the activities of existing international organisations and increase their transparency.

International action should be complemented by new tools. Many ideas in this White Paper could be tested at global level, such as peer review of progress made towards internationally agreed targets or the development of co-regulatory solutions to deal with aspects of the new economy. As in the Union, these approaches should complement successful elements of international public law, most notably the World Trade Organisation and the International Court of Justice.

To achieve these objectives, the Union needs to speak more with a single voice. It should strengthen its representation in international and regional fora, including in relation to economic and financial governance, the environment, development and competition policy. Often, important improvements can and should be introduced under the current Treaty, and would considerably improve the visibility of what the Union is doing at the global level. In some areas, like finance, a change in the Treaty is required. (pp. 26-27)


(Group 5)

White Paper on Governance

MAY 2001

…Executive Summary

The EU has a clear interest in promoting global governance as a means of achieving the core of objectives of sustainable development, security, peace and equity, objectives no territorial actor can secure alone. Positive transnational cooperation is possible and the EU should show a willingness to experiment in order to improve it. The external aspects must be key in any EU deliberations on governance.

This report is based on the conviction that society, as opposed to only individuals, markets and state, does exist; and that a society does exist within the European Union within which governance can be discussed and improved. Democracy is essential to governance but governance is sometimes criticised as introducing non-public and more selfish elements into the public sphere of government. The danger of privatising and eroding democracy clearly exists but including business and civil society in governance can reduce some of the imperfections of government.

The report identifies two sets of reasons for the pursuit of better governance beyond EU borders: growing interdependence driven by economic globalisation; and the rise of threatening, transnational challenges such as climate change and poverty which require greater effort and shared responsibility at global level.

The existing system of governance, although it has achieved much, still has many shortcomings which contribute to conflict, poverty, unsustainable development. Current institutions of governance are increasingly criticised as being unaccountable, lacking transparency and legitimacy and being incapable of responding to today’s challenges. There is considerable scope for improving these institutions and complementing them with new tools. The EU has much to contribute to this task but it must also improve its own ability to provide input if it is to realise its full potential. Like the institutions of global governance, the EU must improve transparency and openness to voices from outside and strive to speak with a single, coherent voice.

…We submit the following recommendations:

5. The EU should use the growing range of proven approaches to global problems (benchmarking, peer review, non-hierarchical governance, soft law and, where appropriate, co- and self-regulation) to build on the successful elements of hard international public law. It should not follow the favourite recipes of the past without close assessment of possible lower cost alternatives or complements.

9. The EU should continue to nurture greater coherence and integration between all policy areas, including by reviewing structures, in order to strengthen its contribution to global governance: the sustainable development strategy is a key opportunity to do this.

10. Drawing on ideas emerging from Member States and civil society, the EU should launch a comprehensive internal discussion on the necessary reform of multilateral institutions in the medium to long term. The aim should be to boost the effectiveness and powers of enforcement of such bodies by identifying resources and structural change taking into account the specific nature of problems confronted by each organisation and scope for action at global/regional level.

11. In the short term, the EU should strive to promote greater coherence between existing international organisations. The EU should also continue to champion greater openness and transparency in international organisations. The aim should be that all members can play a full role, institutions are open to contributions from outside players, and institutions have greater legitimacy in the eyes of those affected.


The European Union: global challenge or global governance? 14 world system hypotheses and two scenarios on the future of the Union

By Arno Tausch

Appearing in Gernot Köhler/Emilio José Chaves Globalization: Critical Perspectives, Nova Science, Huntington NY (2001)

(April 26/27 2001)

Munich Personal RePEc Archive


MPRA Paper No. 319, posted October 10, 2006

MPRA Paper No. 319, posted 07. November 2007 / 00:56


This paper starts from the assumption that there are two basic scenarios for the future of an enlarged European Union in the Tsunami world system. One is an enlarged EU that would be a global challenger, a scenario which would amount to the repetition of the cycles of global challenges, this time on the part of the European Union.

…Although such a scenario is not applicable to the present EU-15 or, at any rate, an EU-15, enlarged by the two island economies of Malta and Cyprus, and the present 10 Central and East European candidate countries, an EU comprising up to 40 nations of the third and fourth enlargement wave indeed would be a major change in the structure of the international system and could be driven by its own internal deficient dynamics, characterized by low innovation and high government spending, and by the pressures of the world system, into such a position. Again, the European landmass, united under one leadership, would then be in the challenging position, - as happened under the Hapsburgs, the French under Richelieu and later under Napoleon, and under Germany in World War I and II, while the dynamics of flexible, sea-power oriented world leadership again would be happening somewhere else...hypotheses, presented here, speak in favor of such a pessimistic scenario.

A large section of the paper is thus dedicated to show, that a global challenge option - which might be implicit in the thinking behind the trilateral competition between Europe, America, and Asia - is not only not feasible, but that it is world politically dangerous. A second scenario is the European Union as the driving force behind a movement towards global governance, the only and reasonable alternative to the workings of the capitalist world system and it’s tendencies towards inequality and conflict. This scenario is the policy option and practical end-result of the assessment of future trends in the world system, presented by Boswell and Chase-Dunn (2000).

In their world-systems-based analysis of the spiral of capitalism and socialism, Boswell and Chase-Dunn (1999) arrive at the conclusion that the European Union would be best fitted to become an engine of socially progressive transformation of the world system. Such an analysis would find lots of sympathy among labor-oriented or social-movement oriented circles on both sides of the Atlantic and beyond, and is also reflected in various other ‘denominations’ of the world systems profession, like in the statements by Samir Amin, who - although very critical of the Union in its present form – speaks about the necessity for Europe to become an alternative pole in the world economy, characterized by the tendencies towards unfettered globalization.

…Our first scenario is somber in nature, it enjoys a high kind of probability, and it has dire consequences. It shows that there is a recurrent, and shortening cycle of conflict in the international system, linked to the long cycles of economics and politics.

…Our assessment of the alternative that Europe could present in the transformation of the world towards a more humane and global governance should thus contribute to showing the dangers of a repetition of the hegemonial challenge scenario, that already was practiced by the Hapsburgs, by France and by Germany. A scenario, that was characterized each time by the combination of protectionism + imperialism.

An imperial path for a United Europe would be the last thing, that the world needs, although there are – from past experiences - lots of indicators that would warn us, that Europe will follow precisely this path. Social science has the imperative to face up to existing dangers: thus, an early socio-liberal and democratizing reform of the European Union would be the (last) alternative to renewed global power rivalry, and conflict in the 21st Century, involving the European landmass. (pp. 2-3)

Hypothesis 2: there is a Tsunami war cycle of 100 to 150 years length

Globalization theory (see Kiljunen, 2000, in this volume) assumes that global governance must become the answer to the tendencies of polarization and poverty described above. Global conflict theory answers by saying that without global governance and peace mechanisms, the world system would threaten to drift back into deadly cycles of hegemonial challenge and global wars. History does not end, thus, only flags have changed. According to Goldstein’s empirical analysis in particular (1988), the capitalist world systems tends continuously towards wars and violent conflicts.

Hypothesis 7: European Union extension threatens to repeat the errors of the ‘terraferma’ strategies in history before (Venice, the Hapsburgs, Napoleonic France, Germany). One has especially to watch the unequal exchange relationships between the European center and the East European periphery. Low growth, big government, big corruption are all part of the social problem dimension that Europe’s political economy nowadays faces. Several authors, including Chase-Dunn and Podobnik, and Chase Dunn and Hall, too, are also fairly pessimistic about the future trajectory of the United States of America. They cite international capital investment abroad in those countries, where profit rates are highest, as the main reason, why the ‘internationalized capitalists’ in the core no longer have a vested interest in their home economy. Capital investment abroad becomes, the argument goes, the driving force for hegemonic decline (Chase-Dunn and Hall, 1997).

The hegemonic decline of the USA will most probably set in slowly, cushioned by the present weaknesses of Japan and of the European competitors. In Europe, economic stagnation and unemployment will significantly rise due to rising interest rates and rent-seeking that is enhanced by the way European institutions are built at present. In terms of the environment, government subventions to declining productive branches (36.8% of the budget of the EU are for the structural funds) will increase technological backwardness and preserve transport intensity, and hence, pollution. Economic inequalities threaten to increase with such a structure, and in turn will form a block of its own against world economic ascent. (p. 62)

Inexorably, the centers of gravity of the world economy will be shifting towards the LDCs, here most notably during the 1970s and 1980s to the countries of the Pacific, and after the Asian currency crisis 1997, most likely to India and China. The effect of the Europe-agreements between the EU and the countries of Eastern Europe seem to repeat the experience of Lomé and can be summarized in one word: a massive positive balance of trade in favor of the Union and to the detriment of the partners in the East, that leads to political and economic friction (Hickman, 1994; Inotai, 1993). A growing number of academic critics of present Union economic policy maintain that the EU-approach to foreign trade and relations with the semi-periphery and the periphery is based on two fatally erroneous assumptions. First, the gradualism of trade liberalization; second, the protectionist answer to the current economic malaise in Western Europe.

Hypothesis 14: there are chances of a policy of capitalist ascent in the 21st century, based on human capital formation, and the overcoming of the ‘urban bias’ of world development. But Europe, with it’s huge state sector, it’s high tariff walls against foreign competition, and it’s large scale penetration by foreign capital, it’s slow process of technological innovation, is destined to become the ‘Argentina’ of the 21st Century. Also. it’s small future population base and rigid migration regime do not qualify it for a rapid 21st Century economic growth. There is a great risk that the European West will treat the newly democratic East as a reservoir of surplus-value and exploitation.

Scenario (2) starts from the assumption, that anyway, Europe is not in a position to become a global challenger. Our scenario is a radical, socio-liberal, and globalistic approach, directed against nationalism, protectionism, and social decay. Instead of accumulating world power, Europe should accumulate competence in problem solving, in modeling the future, and in treating better the tormented environment. Thus, the enlarged European Union should concentrate it’s still existing, considerable economic and world political energies on creating the conditions for global governance and global innovation. Thus, Europe at last could show a real greatness - foregoing the concept of power in benefit of the concept of global well-being and welfare.

…[However,]… Our federal and socio-liberal vision is incompatible with the vision of a Europe of nations, which - in the ultimate instance - leads to the distribution coalition building at the level of the European institutions. A Europe of nations will always, in one way or the other, lead to a blockade of the European institutions - the small nations versus the big ones, the South against the North; the Euro ins against the Euro outs, the wine drinkers against the beer consumers, the friends of pasta and salami against the adherents of sausage and so on. The number of combinations is infinite, and a Europe of 21, let alone many more member states is simply ungovernable on the basis of the present institutions.

By allowing for full-fledged democracy on the European level, combined with a socio-liberal social policy, based on a market economy, an active human capital formation, gender empowerment, an economic policy, that largely ends state subventions for energy misuse and private transport, and an open system of migration policy, generally modeled around the existing patterns of migration policy in countries like Australia, Canada, and the United States of America, there would be enough room for a real economic and social recovery on the level of the European states.


Euro-federalists financed by US spy chiefs

By Ambrose Evans-Pritchard

June 19, 2001

DECLASSIFIED American government documents show that the US intelligence community ran a campaign in the Fifties and Sixties to build momentum for a united Europe. It funded and directed the European federalist movement.

The documents confirm suspicions voiced at the time that America was working aggressively behind the scenes to push Britain into a European state. One memorandum, dated July 26, 1950, gives instructions for a campaign to promote a fully fledged European parliament. It is signed by Gen William J Donovan, head of the American wartime Office of Strategic Services, precursor of the CIA.

The documents were found by Joshua Paul, a researcher at Georgetown University in Washington. They include files released by the US National Archives. Washington's main tool for shaping the European agenda was the American Committee for a United Europe, created in 1948. The chairman was Donovan, ostensibly a private lawyer by then.

The vice-chairman was Allen Dulles, the CIA director in the Fifties. The board included Walter Bedell Smith, the CIA's first director, and a roster of ex-OSS figures and officials who moved in and out of the CIA. The documents show that ACUE financed the European Movement, the most important federalist organisation in the post-war years. In 1958, for example, it provided 53.5 per cent of the movement's funds.

The European Youth Campaign, an arm of the European Movement, was wholly funded and controlled by Washington. The Belgian director, Baron Boel, received monthly payments into a special account. When the head of the European Movement, Polish-born Joseph Retinger, bridled at this degree of American control and tried to raise money in Europe, he was quickly reprimanded.

The leaders of the European Movement - Retinger, the visionary Robert Schuman and the former Belgian prime minister Paul-Henri Spaak - were all treated as hired hands by their American sponsors. The US role was handled as a covert operation. ACUE's funding came from the Ford and Rockefeller foundations as well as business groups with close ties to the US government.

The head of the Ford Foundation, ex-OSS officer Paul Hoffman, doubled as head of ACUE in the late Fifties. The State Department also played a role. A memo from the European section, dated June 11, 1965, advises the vice-president of the European Economic Community, Robert Marjolin, to pursue monetary union by stealth.

It recommends suppressing debate until the point at which "adoption of such proposals would become virtually inescapable".


V. List of Sources (in order of appearance)


Lawrence A. Kogan, The Extra-WTO Precautionary Principle: One European 'Fashion' Export the United States Can Do Without, 17 Temple Political & Civil Rights Law Review 2, (Spring 2008)

Lawrence A. Kogan, Europe’s Warnings on Climate Change Belie More Nuanced Concerns, Institute for Trade, Standards and Sustainable Development (June 2007)

Press Release, Elizabeth Katz, University of Virginia School of Law, German High Court Has More Power Over Legislature, Grimm Says (Mar. 9, 2006)

PEDRO Gorospe, Al Gore compares the financial crisis with climate change, Bilbao – (16/10/2008)

Edition - Sarkozy piqué au vif par sa poupée vaudou, (Oct. 21, 2008)

Obama campaign outraged by New Yorker cover, Agence France Presse (July 14, 2008)

Czech President Vaclav Klaus and ITSSD CEO Share Some Thoughts and Ambitions Concerning Freedom & Climate Change, ITSSD Journal on Economic Freedom

Czech President Vaclav Klaus Has Long Warned Against Global 'Europeanism': But is the 110th U.S. Congress Listening? Does it Want This for America??, ITSSD Journal on Economic Freedom

ITSSD Website - Issues - Negative SD and Brussels Centralized Decision-Making: Czech President Vaclav Klaus (6 Entries)

Basque Country (autonomous community), Wikipedia

Elana Schor, ABC deems Gore climate change advert too 'controversial' for TV, (10/10/08)

UN Secretary General offers host financial summit, Associated Press (Oct. 18, 2008)

Carley Petesch, UN chief offers to host global financial summit, Associated Press (Oct. 20, 2008)

CHRISTOPHER COX, Swapping Secrecy for Transparency, New York Times (Oct. 19, 2008)

Roger Runningen and Gregory Viscusi, Bush to Host First in Series of Summits on Financial Crisis, Bloomberg News (Oct. 19, 2008)

Leaders to rethink global finance, BBC News (Oct. 19, 2008)

US to host global finance summit, BBC News (Oct. 19, 2008)

EU advice on money: Should the EU give counsel on resolving the credit crunch?, (Oct. 19, 2008)

Roger Crombie, Browncesceau saves the world? No, The Royal Gazette (Oct. 18, 2008)

Jacques Cheminade and Christian de Boissieu debate NBW on TV France 24's `Face Off', Executive Intelligence Review (Oct. 18, 2008)

Chris Marsden, EU call for global financial regulation masks intra-European and international tensions, World Socialist Website (Oct. 17, 2008)

Peggy Hollinger, Plea to safeguard free trade, Financial Times (Oct. 17, 2008)

Peggy Hollinger, French business leader warns on over-regulation, Financial Times (Oct. 17, 2008)

Bush: successor must overhaul financial rules, Agence France Presse (Oct. 17, 2008)

Seeking an end to the madness - Europe's leaders want to see a new global financial system emerge, The Economist (Oct. 16, 2008)

EU leaders push for finance overhaul at summit, Agence France Presse (Oct. 15, 2008)

James G. Neuger and Mark Deen, Brown Seeks Global `Early Warning' System on Crises (Update4) Bloomberg News (Oct. 15, 2008)

EU in push for world finance summit: Sarkozy, EU (Oct. 12, 2008)

Ignazio Angeloni, TESTING TIMES FOR GLOBAL FINANCIAL GOVERNANCE, Bruegel Essay and Lecture Series (Oct. 2008)


Eurobama Seeks Support From Green EU Social Welfare Regulatory State to 'Change' America, ITSSD Journal on Pathological Communalism


EUROPEAN GOVERNANCE - A WHITE PAPER, Commission of the European Communities COM(2001) 428 final


Arno Tausch, The European Union: global challenge or global governance? 14 world system hypotheses and two scenarios on the future of the Union, in Gernot Köhler/Emilio José Chaves Globalization: Critical Perspectives, Nova Science, Huntington NY (2001)

Ambrose Evans-Pritchard, Euro-federalists financed by US spy chiefs, (June 19, 2001)

No comments: