Bank of Canada Senior Deputy Governor Tiff Macklem said delays by the Group of 20 nations in fixing “imbalances” in trade and fiscal policies threatens to exacerbate recent financial market instability and erase trillions of dollars of demand.
“As the recent extreme market volatility has made all too stark, we hand financial markets the opportunity to speculate against needed adjustments at our collective peril,” Macklem, who helped lead G-20 talks on improving financial rules, said at a banking conference in Mumbai today. “We have fallen short in correcting the imbalances that are plaguing the global economy and fueling financial vulnerabilities.”
Canada and India co-chaired Group of 20 panels that sought ways to strengthen financial regulation and generate more sustainable economic growth. The world’s largest economies are talking about how to unwind “imbalances” in global trade and exchange rates, which could boost demand between C$6 trillion ($6.1 trillion) and C$9 trillion by 2015, he said.
“The working group’s focus now is on the key challenges of fostering greater exchange-rate flexibility in emerging markets, encouraging deeper and more significant structural reforms, and strengthening the fiscal commitments made in Toronto” last year, Macklem said.
The MSCI Asia Pacific Index, which has dropped 12.7 percent this year, slid 0.5 percent at 10:42 a.m. in Mumbai. Standard & Poor’s 500 Index futures lost 0.5 percent.
‘Intensified’ Crisis
Recent signs that the global recovery is at risk include the “intensified” European fiscal crisis, the loss by the U.S. of its top credit rating and “a broad range of data” that indicate slowing economic growth, Macklem said.
U.S. consumer confidence in August plunged to the lowest level since May 1980, while European economic growth slowed more than economists forecast in the second quarter as Germany’s recovery almost ground to a halt.
Emerging-market policies of limiting gains in their currencies and building up foreign-exchange reserves are also a hindrance, Macklem said.
“With only very modest adjustments of the renminbi against the U.S. dollar, China’s real effective exchange rate against its full range of trading partners has actually depreciated since June 2010,” he said.
“As the consequences of this lack of adjustment spill over on to others, G-20 members are increasingly taking individual actions that collectively risk further thwarting needed global adjustment,” Macklem said, saying Canada and India are being hurt by those policies.
He also repeated Canada’s call for the implementation and enforcement of so-called Basel III requirements for lenders to hold more capital and for new regulation of over-the-counter derivatives contracts such as currency swaps.
“It is critically important that the momentum driving financial sector reform be maintained,” Macklem said.
Source: http://www.bloomberg.com
“As the recent extreme market volatility has made all too stark, we hand financial markets the opportunity to speculate against needed adjustments at our collective peril,” Macklem, who helped lead G-20 talks on improving financial rules, said at a banking conference in Mumbai today. “We have fallen short in correcting the imbalances that are plaguing the global economy and fueling financial vulnerabilities.”
Canada and India co-chaired Group of 20 panels that sought ways to strengthen financial regulation and generate more sustainable economic growth. The world’s largest economies are talking about how to unwind “imbalances” in global trade and exchange rates, which could boost demand between C$6 trillion ($6.1 trillion) and C$9 trillion by 2015, he said.
“The working group’s focus now is on the key challenges of fostering greater exchange-rate flexibility in emerging markets, encouraging deeper and more significant structural reforms, and strengthening the fiscal commitments made in Toronto” last year, Macklem said.
The MSCI Asia Pacific Index, which has dropped 12.7 percent this year, slid 0.5 percent at 10:42 a.m. in Mumbai. Standard & Poor’s 500 Index futures lost 0.5 percent.
‘Intensified’ Crisis
Recent signs that the global recovery is at risk include the “intensified” European fiscal crisis, the loss by the U.S. of its top credit rating and “a broad range of data” that indicate slowing economic growth, Macklem said.
U.S. consumer confidence in August plunged to the lowest level since May 1980, while European economic growth slowed more than economists forecast in the second quarter as Germany’s recovery almost ground to a halt.
Emerging-market policies of limiting gains in their currencies and building up foreign-exchange reserves are also a hindrance, Macklem said.
“With only very modest adjustments of the renminbi against the U.S. dollar, China’s real effective exchange rate against its full range of trading partners has actually depreciated since June 2010,” he said.
“As the consequences of this lack of adjustment spill over on to others, G-20 members are increasingly taking individual actions that collectively risk further thwarting needed global adjustment,” Macklem said, saying Canada and India are being hurt by those policies.
He also repeated Canada’s call for the implementation and enforcement of so-called Basel III requirements for lenders to hold more capital and for new regulation of over-the-counter derivatives contracts such as currency swaps.
“It is critically important that the momentum driving financial sector reform be maintained,” Macklem said.
Source: http://www.bloomberg.com
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