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mercy of short-term-oriented legislatures." In essence, gigantic hedge funds and private equity firms." He it is not to be accountable to the people of the world. recommended: "The GMA's board would have to So, he asked the question: "To whom would a global include central bankers not just from the US, UK, the central bank be accountable?" He then answered: "It eurozone and Japan, but also China, Saudi Arabia and would have too much power to be governed only by Brazil. It would be financed by mandatory contributions echnocrats, although it must be led by the best of — from every capable country and from insurance-type hem. One possibility would be to link the new bank to — premiums from global financial companies—publicly an enlarged Group of Seven—perhaps a 'G-15' [or, in __ listed, government owned, and privately held alike.” oday's context, the G20] that would include the G-7 On 16 October 2008, Morgan Stanley CEO John Mack plus rotating members like Mexico, Brazil, South Africa, | was reported as stating that "it may take continued Poland, India, China and South Korea." international coordination to fully unlock the credit He further stated that there would have to be "very _ markets and resolve the financial crisis, perhaps even by close collaboration" between a global bank and the Fed. _ forming a new global body to oversee the process". He added: "The global bank would not operate within In a Newsweek article” posted on 25 October 2008, he United States, and it would not be able to override —_Jeffrey Garten stated that "leaders should begin laying he decisions of our central bank. But he groundwork for establishing a it could supply the missing global central bank". He added: international ingredient—emergency 7 . , “There was a time when the US Federal inancing for cash-starved emerging Even if the US's Reserve played this role, as the prime markets. It wouldn't affect American g ; G inancial institution of the world's mortgage rates, but it could help the massive financial most powerful economy, overseeing profitability of American multinational rescue operation he one global currency. But with the companies by creating a healthier . growth of capital markets, the rise o global environment for their succeeds, It currencies like the euro and the businesses." ; should be emergence o power prayers such as In 2008, Jeffrey Garten wrote an China, the shift of wealth to Asia and article“, published in the Financial Times followed by the Persian Gulf and, of course, the of 25 September, in which he stated: something even deep-seated problems in the American "Even if the US's massive financial economy itself, the Fed no longer has rescue Operation succeeds, it more far- the capability to lead should be followed by Something reaching—the singlehandedly. i" ten even more far-reaching—the . e explaine e criteria and establishment of a Global establishment operations of a world central bank, Monetary Authority [GMA] to of a Global saying: "It could be the lead oversee markets that have become regulator of big global financia borderless.". He emphasised the Monetary institutions, such as Citigroup or Deutsche Bank, whose activities spill across borders... It could ac as a bankruptcy court when big global banks that operate in o a strong public oversight multiple countries need to be unction with rules or restructured. It could oversee no intervention, and would return to capital formation the just the big commercial banks, such as Mitsubishi UF, goal of economic growth and development rather than but also the ‘alternative’ financial system that has trading for its own sake." developed in recent years, consisting of hedge funds, Further, he stated: "A GMA would be a reinsurer or _ private-equity groups and sovereign wealth funds—al discounter for certain obligations held by central banks. of which are now substantially unregulated.” Further, i t would scrutinise the regulatory activities of national "could have influence over key exchange rates, and authorities with more teeth than the IMF has and might lead a new monetary conference to realign the oversee the implementation of a limited number of _ dollar and the yuan, for example, for one of its firs global regulations. It would monitor global risks and = missions would be to deal with the great financia establish an effective early warning system with more imbalances that hang like a sword over the world clout to sound alarms than the BIS has." Moreover, he — economy”. said: "The biggest global financial companies would He postulated: "A global central bank would no have to register with the GMA and be subject to its eliminate the need for the Federal Reserve or other monitoring, or be blacklisted. That includes commercial national central banks, which will still have frontline companies and banks, but also sovereign wealth funds, | responsibility for sound regulatory policies and "need for a new Global Monetary Authority. It would set the tone or capital markets in a way that would not be viscerally opposed Authority..." rescue operation succeeds, it should be followed by something even more far- to reaching—the establishment of a Global Monetary Authoritv..." Authority..." economy". He postulated: "A global central bank would not eliminate the need for the Federal Reserve or other national central banks, which will still have frontline responsibility for sound regulatory policies and NEXUS ¢ 19 "Even if the US's massive financial AUGUST — SEPTEMBER 2009 www.nexusmagazine.com