What’s a trillion dollars between friends? G20 leaders agree to cough up

April 3rd, 2009 by admin | Filed under Central banks, Daily News, Global Credit Crisis, Recession, The Markets, UK Bank Accounts, World Banks.

When the implications of the current financial crisis began to dawn on an unprepared word, financial analysts were throwing around phrases like ” it will take two trillion dollars to get the World out of this mess” For the man in the street this was hard to digest, mainly because very few people can encompass how much money a trillion dollars is, let along two of them. For those of you that haven’t already found out, a trillion dollars is one thousand billion dollars or 683 billion pounds if that makes you feel better. And that is the sum of money that members of G20 agreed to throw into the global kitty, and by doing so will be signalling the beginning of the end of the world recession.

What makes this second trillion more significant than the first is that it will be handled largely by the International Monetary Fund (IMF) and not by World banks and business conglomerates. With this move IMF will see their cash reserves more than tripled.

A further $100bn has been earmarked to open up new credit lines aimed in to encourage countries to increase international trading and prevent protectionism, and $250bn for finance domestic trade in across the globe.

UK Prime Minister Gordon Brown, who hosted the conference, found it hard to suppress his enthusiasm of the outcome. He announced. “This is the day that the world came together, to fight back against the global recession”

As well as discussing the level and the manner of funding, G20 leaders also touched upon a few other spicy subjects including tax havens, increased regulation of the financial system regarding large hedge funds, performance based bonuses and hefty salaries in the financial services sector and a much stricter overseeing of agencies that provide credit ratings.

The rift between the Us and European camps did not transpire although French President Nicolas Sarkozy and Angela Merkel, the German chancellor did take their expected stance against more money being pumped into economies to stimulate a return to growth

Despite the fact that it appears that fresh fiscal stimulus will not be forthcoming , the consensus among the delegates was that the fiscal expansion that the trillion plus dollars will generate recovery and growth equivalent to $5,000 billion worldwide, equal to four per cent boost of World Production.

As the meeting wound down, the G20 issuing a statement which stated that the actions will constitute the largest fiscal and monetary stimulus and the most comprehensive support programme for the financial sector in modern times. And hopefully the last.