Sustainable private growth and the role of financial reform
This is not yet assured.

Most immediately, there is a risk that a series of contingency measures could extend to a global scale the current European trend towards renationalisation. That is one reason why the European initiatives expected in the coming weeks are so important.

More broadly, the financial reform agenda must address legitimate emerging-market concerns over the resiliency of the advanced-economy financial systems. Because of these worries, there is pressure for localization to protect domestic systems and renewed use of capital controls to dampen the volatility of cross-border flows. If allowed to persist, these nascent trends could seriously restrain the global capital flows necessary for the next stage of the global transformation.

The imbalance between states and markets
I recall the German Finance Minister, Peer Steinbrück, at a fateful G-7 meeting in the wake of Lehman’s failure, relating that he had met a woman in East Germany earlier that week who told him that: “I have seen the fall of communism and now I am seeing the fall of capitalism.”

The complete loss of confidence in private finance at that time could only be arrested by the provision of comprehensive backstops by the richest economies in the world.

Even with these heroic efforts, the global financial crisis has cost $4 trillion in lost output and 28 million lost jobs, and built perilous fiscal deficits. As is typically the case, much of the cost has been borne by countries, businesses and individuals who did not directly contribute to the fiasco.

To restore confidence in the system, we must create a truly global system, in part by rebalancing the relationship between governments and markets. Governments must discard the myth that finance is self-regulating and self-stabilising, and financial policy-making can no longer be concentrated at national levels.

Given the reality of global finance, it is not enough to have our own house in order unless we seal ourselves off from the world—and if we were to do that we will end up much poorer.

An open, resilient global financial system will be central to the transformation of the global economy. In order to achieve that, financial sector reform is a must. The G-20 has a serious agenda, being aggressively implemented. The current intensification of the euro crisis has only sharpened our resolve.

Read more on building resilient financial institutions and ending too-big-to-fail…

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Scott Warner:

This speech is aimed at furthering the notion of the “global” economy. I do not subscribe to that notion and really you can see that we pay a huge penalty here for the experiments of the global socialists. Ask yourself as you watch your investments dwindle each day while the “stock” market posts triple digit declines … why should your reitrement savings be devastated just because some people in Greece don’t want to work? Beware people that will try to tell you “its not that simple” … it walks like a duck …

Tuesday, June 26 at 7:19 am | Reply

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