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.