G20 call for further action- does this help?

The G20 completed its meeting over the week-end and ended with a communiqué that called for further action and “broader policy response”. This does not mean much because it is the individual countries that taker action and there were no new plans for coordinated fiscal or monetary policy. Yes, there were requirements for finance minister to come back in March with new plans for regulatory reform and policy action but that does not help the markets in the coming week. The group set a March deadline for recommendations on strengthening accounting standards, derivatives markets and oversight of hedge funds and debt-rating companies. It is not clear what the form of these plans will be so there is little news for positive reaction.

There were two positive responses with the G20 asking for a continuation of trade talks for the Doha Round and conclusions to these negotiations by year-end. Anything that will reduce the pressure to add protectionist barriers or to enhance trade flow is vital in the current environment. Second, the IMF got a pledge from the Japanese to increase their commitment of credit by $100 billion. This increases the funds available to the IMF at this critical time. The IMF also loosened lending facilities which should free funds for countries that have been paralyzed by the credit crisis.

The global economies are in a special wait and see period. The patient has been administered medicine but there has to be some time allowed to let it do its work. Data is coming in and tells us the current state of the economies in September and at best October. This was before much of the stimulus action was taken so it is early to determine the reaction of some government programs.