Dollar and other currencies in cash.

Confronting the Coming Liquidity Crisis

This month, G-20 leaders will meet in Antalya, Turkey, for their tenth summit since the 2007 global financial crisis. With liquidity risks intensifying, G-20 leaders must streamline their agenda to focus on one objective: creating international financial arrangements capable of responding effectively to a crisis.

SAO PAULO – This month, G-20 leaders will meet in Antalya, Turkey, for their tenth summit since the 2007 global financial crisis. But, despite all of these meetings – high-profile events involving top decision-makers from the world’s most influential economies – no real progress has been made toward reforming the international financial architecture. Indeed, the group has not seriously engaged with the subject since the 2010 summit in Seoul. Put simply, the G-20 is failing in its primary and original purpose of enhancing global financial and monetary stability.

A big part of the problem is that the G-20 agenda has become increasingly congested over the years. At a time of looming financial upheaval, the G-20 must stop attempting to tackle a broad array of issues simultaneously – a goal that has proved impossible – and go back to basics.

The United States Federal Reserve is now preparing to raise interest rates, which it has kept near zero since the crisis. While monetary-policy tightening may be necessary, it risks triggering a serious liquidity crisis in developing countries, with a major impact on economic growth and development. That is why, at this month’s G-20 summit, participants must focus on providing a credible institutional backstop for the difficult times ahead.

To continue reading, please log in or enter your email address.

To continue reading, please log in or register now. After entering your email, you'll have access to two free articles every month. For unlimited access to Project Syndicate, subscribe now.

required

By proceeding, you are agreeing to our Terms and Conditions.

Log in

http://prosyn.org/I5FDkHu;

Handpicked to read next

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.