Mark Carney: Rebalancing the global economy bis.org, Bank for International Settlements | June 11, 2009

“Remarks by Mr Mark Carney, Governor of the Bank of Canada, to the International Economic Forum of the Americas Conference of Montreal, Montreal, 11 June 2009.

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“The theme of this conference – “Adapting to a New World Order” – suggests that it is clear how global commerce and finance will be reorganized in the wake of the current crisis. However, the outcome is far from preordained. How we manage the rebalancing of the global economy could profoundly influence how open, equitable, and prosperous the New World Order will be.

“Globalized product, capital, and labour markets lie at the heart of the New World Order to which we should aspire…

“The second important correction in this period of transition to the “New World Order” will be characterized by significant stock adjustments in the financial and real sectors of major industrialized economies….

“The financial panic required a bold response from the public sector. The loss of faith in the solvency of core banking institutions at times threatened the very functioning of the global financial system. While absolutely necessary, the response to the crisis has profoundly shifted risk from the private sector to the public sector. Since October, the G-7 has committed that no systemically important financial institutions will be allowed to fail. Across the world, bank financings have been guaranteed. With securitization markets still moribund, assets have been purchased and tail risks assumed by the public sector. Governments have even guaranteed warranties on certain car models. With these precedents, there will be further pressure for a host of new risk-sharing arrangements…

“Fourth, all countries must accept their responsibilities for promoting an open, flexible, and resilient international monetary system. Responsibility means recognizing spillovers between economies and financial systems and working to mitigate those that could amplify adverse dynamics. It means submitting to peer review within the Financial Stability Board and external review by the International Monetary Fund….”

Conclusion: Banks are obviously in charge of governments.

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