G20 Statement of Goal without Plan

This seems to be a critical part of the recent G20 Finance Ministers' statement: "We will continue to implement decisively our necessary financial support measures and expansionary monetary and fiscal policies, consistent with price stability and long-term fiscal sustainability, until recovery is secured," the statement said.

Federal reserve (and most central banks) is supposed to foster full employment and manage long-term inflation.

It would seem that monetary policy alone has been insufficient in doing this – and, in fact, has exacerbated bubbles.

The key to G20 success would seem to be the concrete steps to achieve PRODUCTIVITY growth that allows for expansion while minimizing inflation. In this, the finance ministers would have to enroll the central banks to support a broader fiscal/monetary policy.

But this would seem to question the past/future role and independence of central banks.

G20 Bank Action

While over-regulation is certainly possible -- putting some structure to bank compensations seems appropriate. Historically, bank executives seemed too eager to try to compete with investment banks and hedge funds to recruit people (and overpay them) and take risks with such (betting a lot of bank capital). This is all while being subsidized by the public with low cost deposit funding.

With stronger bank capital requirements -- still think the issue are: (a) the need for better regulators (not smarter ones who know they are smart and powerful -- more effective ones), (b) deposit insurance premiums that better reflects the risks of particular banks, and (c) a more dynamic concept of risk capital (and one that allows for lower capital requirements during recessions -- rather than killing banks by making them sell assets during the worst market conditions to meet static requirements -- CAPITAL LEVELS ARE SUPPOSED TO BE LOWER DURING DIFFICULT PERIODS).

Hopefully, in addition to regulation -- hopefully the G20 will also consider organizing themselves so that all countries do not overinvest in the same things. One idea would be a bidding process for certain technology areas (with the proceeds of the bids going to develop lesser countries).