 The natural way to begin is this week is the 10th anniversary of the global financial crisis. And in the aftermath of the global financial crisis, the President of the UN General Assembly set up a commission to look at a commission of experts to look at the global financial system, an economic system, and what was very clear about the global financial system and the way it had worked in 2007, 8, and 9 was that it had very clearly served to transmit a significant disturbance coming from the United States and make it global and in some ways amplify it. And so the question that was posed to our commission was, what can be done to reform the global financial and economic system? Well, 10 years later, I'll report that Jose Antonio referred to, and he was one of our commissioners, exactly striking how little has been done, almost nothing. So this book is actually a good occasion to revive many of the key issues that we raised. And among the issues that we talked about are the issues that Jose Antonio has focused on, the issues of the governance of the global economic system, this idea of a global economic coordinating council reflecting the concerns about the lack of representativeness and legitimacy of the G20 and trying to get more voices into decision making, the concerns about the global reserve system that I'm going to focus most of my comments on, the problems of macroeconomic coordination, which there was a moment after the 2008 crisis where particularly Gordon Brown, who was the prime minister of UK at the time, managed to corral everybody together to have a coordinated stimulus, and had it not been for that, I think people think that the downturn would have been much deeper. But it wasn't long after that, that short period of unity started to fray, and in particular you began getting two very different views of macroeconomic theory, macroeconomic policy, and it became actually impossible to coordinate. Some countries like Germany began to talk about austerity, and other countries talked about the role of stimulus in Keynesian. So you had a world in which you had really two very different economic theories, and no possibility with given that conflict of the world acting in any coordinated way. And I think that contributed to the very slow recovery. Another issue that we talked about in our report that came out in 2010 was the cross-border capital flows, and the mantra of the day before the crisis was you didn't need any financial market regulation. And I think the crisis made it very clear that financial markets can't regulate themselves, and when they fail, there are large consequences for everybody, for the global economy. But even recognizing the need for regulation leads open an issue which the U.S. Treasury, even under Obama, could not come to grips with. And that is, is there an argument for a different regulation of cross-border flows from domestic flows? And I think by now everybody recognizes, especially with President Trump, the borders do matter. There are such things as nation-states, and treaties don't seem to make any difference and things like that. And so the good news on this is that in 2010 and reiterated in 2011, the IMF came to recognize that cross-border flows were important and that countries should have scope for what was called current account management, which is just another way of saying capital controls, but it's a softer way of saying that because nobody likes the idea of control, everybody likes the idea of management. And so the principle that it is important to have some forms of cross-border regulation and cross-border flows I think is now well accepted. There remains very important disputes about the magnitude, the kinds of controls of management with the IMF taking the view that they should be minimal. And my view is that you need much more robust systems and not just using price mechanisms but also quantity controls. There have been, related to this, large changes in views of exchange rate management in general. The general view is, of course, that exchange rate manipulation is a bad thing, and that means when other countries manage their exchange rate, it's called manipulation, and when you do it, it's for macroeconomic stability. But what is very clear is that every country has a wide variety of instruments to affect the exchange rate, not just direct intervention, but almost every aspect of economic policy from interest rates to regulations affecting what foreigners can invest within one country and what domestic people can invest abroad. And all of those affect the exchange rate, and by adjusting those regulations, you affect exchange rates, and that obviously has very big effects on bilateral trade deficits. And then the final issue is one that had almost disappeared for a decade after the Argentina's financial crisis, and that was sovereign debt restructuring frameworks. But that issue has come back to the fore. The issues of, you know, several countries, including Greece, have faced issues of sovereign debt restructuring, and it's very likely that with developing country crises that we're looking forward to, there'll be more debt restructurings going forward. Here again, there's been some progress in spite of the very strong opposition from the U.S. government, including from the Obama administration. And that is that the UN in 2014 agreed that there should be a framework, an internationally agreed framework for restructuring sovereign debt. And in 2015, at the General Assembly meeting, the principles of sovereign debt restructuring were agreed, I think it was almost unanimous, there were like six countries opposing, unfortunately there happened to be influential countries, including the United States. So progress has remained, and actually implement in these has remained very slow. But I think it is progress that there has now been well articulated a set of principles that almost all countries agreed to, and where there is now work trying to translate those principles into mechanisms of sovereign debt restructuring. So that just, and Jose Antonio's book tries to reflect on where the state of the art today is in all of these issues. And as I say, I wish there had been more progress in the last decade, but it is really important that these issues be kept at the forefront. I want to focus on my remarks on a global reserve system. And there are several reasons why it is important, I think, for us to recognize the importance of having a global reserve system. The current system, countries need reserves to protect themselves against volatility of their exchange rate, of trade patterns. You can't get insurance. In some moments, the IMF has tried to describe itself as insurance. But the premium, if you want to think about that, insurance premium is giving up your sovereignty and some countries don't like that idea. So countries want to have some way of protecting themselves against what would happen if there's a financial crisis, for which they are partly responsible, for which they may not be responsible. And particularly after the 1997, 98 East Asia crisis, the recognition of the importance of these reserves grew enormously. And the result of that was the size of the reserves grew to something like $9 or $10 trillion. That has some very big consequences for the global economy when the countries around the world every year are taking income and you can think about burying it in the ground, not spending it. The result is a deficiency in global aggregate demand. And you can make up for that deficiency in global aggregate demand in a number of ways. For instance, it used to be, from a global perspective, you can make up for it by having developing countries spend more than their income. But the IMF and countries have realized that's a very dangerous way for themselves because as the debts accumulate, the probability that they're having a crisis increases. And so the idea of fiscal discipline has become widespread over the last 20 years. And so there is not the, there's an asymmetry here. Some countries are spending less than their income and burying it in the ground in the form of reserves. But other countries are not spending more. Occasionally, one does, like the United States, is went on to spending spree in December in 2017, in January 2018, and increased its deficit by 3% of GDP in three weeks. Any other country that did that would be hauled before the international opinioning said that's totally irresponsible behavior. And to its credit, the IMF did say what the U.S. did was irresponsible. But it didn't have much effect. So the norm outside of that exceptional behavior is that there's an asymmetry. Countries are not spending as, many countries are not spending as much as their income and it's not being made up for by other countries spending more. And that leads to a deficiency of global aggregate demand. If the global financial markets work better, you might have been able to, what they would call, recycle these surpluses. And at various times that's happened, but our global financial markets, private financial markets don't work very well in doing that. The part of the problem is that a lot of the savings is long-term savers, like sovereign wealth funds and national reserve. And the investment needs are long-term, like long-term infrastructure. And standing in between the two are short-term financial institutions. And so that disconnect there means that a lot of the money that might have been recycled doesn't. So the net effect of this is that there is a deficiency of global aggregate demand. And I'll explain, and the way the global reserve system addresses that is that every year you would create new reserves, Jose Antonio refers to them as SDR, I'll come back to that in a second, that's a particular institutional way of doing it, but you create new reserves and you give bank deposits to countries to spend to offset the money that they are otherwise putting into their reserves. So it's like creating, increasing the global money supply. And you can do that in the right amount to make up for the deficiency in global aggregate demand caused by the reserve accumulations. So we're talking about $300, $400 billion a year, not a huge amount, but enough to make a very significant difference for developing countries. The second reason for a global reserve system is that the current system is very unstable. The current system, one country becomes the global reserve currency. What does that mean? People hold that country's IOUs. That means that country is getting more and more in debt. And that gives rise to what is called the Triffon paradox as that country gets more and more in debt. Others may say, well, maybe they won't be able to repay it or repay it with currency of fixed value. So there is the risk of a lack of confidence in the reserve currency as reserves in that currency grow. And if there's more than one reserve currency, views about the relative merits of one versus the other can be very destabilizing. People say for one moment they want to put it in one reserve currency and then in another. So the net effect of all of this is that the dollar reserve system or the sterling reserve system when it exists single is potentially very unstable. Interestingly, if you think about the consequences to the country itself who is the reserve currency, it submits blessing. A lot of countries would like to be the reserve currency. It seems to be an advantage because you can borrow at low interest rates because people want to hold your bonds in reserves. But at the same time, the fact that they are holding your bonds means that you have a current account deficit. And that current account deficit means that domestically there's weak aggregate demand. And that was a problem with the U.K. before World War II. And Kings realized this and what he wanted at the Bretton Woods was to get rid of being the reserve currency. He wanted the U.K. no longer to be a reserve currency. He wanted to create the global reserve system that we're describing. But the U.S. was not at that point internationalist enough to accept that. And so the great swindle, you might say, of the Bretton Woods was that the U.K. got the U.S. to accept being the reserve currency. So it was great for the U.K. because they got rid of this current account deficit problem and their economy started to grow better, but the U.S. got the problem. And it has been contributed to this persistent current account deficit that we've had now for a very long time. So those are the two signs you can make up for it by spending more than your income, which is fiscal expansion, but that means your debt gets larger and larger, and that goes back to the Treffen paradox. In 2000, in the moments after the financial crisis, I began a campaign to try to convince countries to adopt the global reserve system, and it was some success. We got China to support it, Russia to support it, France, who was heading the G20, supported it. They said they were going to put it at the head of the G20 agenda, and there was just one minor problem called Obama. And so I talked to him about it, and he said, you know, I talked to basically the arguments, the two sides of it, and he really grasped it, and he said, you're right, it's not so good for the United States, but he said, you know, I'm just too conservative for a big change like this. So it didn't happen, but it was worse than that. They put pressure on France not to have it discussed at the G20 meeting as one of the key issues. So that moment of peak of discussion of a global reserve system is now sort of waned. The third reason for a global reserve system is the inequity of the current system. The inequity is the following. Many developing countries are holding large amounts of U.S. dollars in their reserves, large amounts for their woman wealth. And what does that mean when they're holding reserves? They are lending to the United States, they're lending to the United States the last few years at a negative real interest rate. Meanwhile these countries are borrowing from the United States at very high interest rates. Now I've always thought the United States needs a lot of assistance from poor developing countries. We clearly need political assistance in our democracy, but we need, you know, but from any point of view of global equity, the fact that we are getting all this money in foreign aid from developing countries seems, in the face of it, unjust. And that, you know, they lend to us at a low interest rate and we lend back to them at a high interest rate just seems inequitable to me. So the current system I think is fundamentally deeply inequitable. So I think there are compelling reasons for creating a global reserve system. There are many institutional ways of doing it. Jose Antonio is focused on one, the SDRs within the IMF. I think there are good reasons not to do it within the IMF. Historically the IMF has been tainted with certain policies that some people may not agree with. And this would, my own view is that it should be a basically system that automatically creates reserves and puts them in the accounts of developing countries. I'm going to talk about this a little bit more tomorrow if I have time. I think it's particularly important because the major growth model that has worked for the last 40 years, export-led manufacturing development, is not going to be working in the next quarter century. And there is going to be a need for more assistance. And this is one way of providing assistance in a world where the G7 has not lived up to their commitment to make 0.7% of GDP. This is a way of gathering a fairly regular supply of money to developing countries. I would make it almost unconditional. And the only conditions would be that countries, the main conditions I would focus on, are focused on global public goods like climate change, nuclear proliferation, things that are a broad consensus within the international community are important for global citizenship. So I think all the reforms in the NAG system that Jose Antonio described are really important to undertake. I think this is one that actually is eminently doable. I don't think it's that difficult. And it would make a difference for development. And it would make a difference for stability and for the overall level of global aggregate demand. And all it takes is political will and having the right president in the United States.