Forex Investment and Currency Trading

On 14-15 November, China’s President Hu Jintao will be in Washington, sitting around a big table talking with other G-20 leaders about the world’s new financial architecture. It is right that he and his super-senior team will be in the room. China is a major player in the world economy and a huge influence in the world’s financial markets, and will of course play an important part in implementing any decisions made. As a meeting of the leaders of all the G-20 economies, the summit has been compared with the Bretton Woods meetings in New Hampshire in July 1944. Then, a new global financial architecture was founded – the International Monetary Fund (IMF), the World Bank, and the forerunner to the World Trade Organisation were all established. What is this conference going to achieve? With less than a week to go, it is difficult to say. Lots of ideas are floating around. To name but a few:

• A rethink of Basel II capital requirements, perhaps requiring banks to build up more capital in boom times and less in hard times;
• Greater regulation of investment banks and hedge funds (even though none of the latter have so far collapsed, causing systemic problems, and there are few of the former left anyway);
• A global financial regulator;
• Limits on bonuses;
• More rules and transparency for derivatives products, and putting more of them onto exchange-based trading systems;
• Recapitalisation and wider reform of the IMF;
• Changes in accounting rules – when, if ever, is the right time to suspend marking to market?
• A new style of monetary policy that involves considering prices of assets as well as goods.

Few of these ideas have been clearly worked through or have unanimous support. That should be no surprise as most central banks are still fighting their own financial market fires, leaving them little time for thoughtful consideration of what caused this crisis and what now needs to be done. The other problem is that some of these are old debates which are politically tricky to resolve. A global financial regulator would require national regulators to give up powers, for instance. So, we are likely to see broad agreements on some principles and the establishment of working groups which will help prepare a second, more conclusive, summit early next year.