Magazine article Modern Trader

G-7 Insights from Canada

Magazine article Modern Trader

G-7 Insights from Canada

Article excerpt

Baptism by fire is how John Crow was initiated into the world's elite economic policy club -- the Group of Seven (G-7).

Just weeks after taking the reins of Canada's central bank in February 1987, Crow found himself in Paris hammering out an agreement, the Louvre Accord, which drew to an end one of the first-ever orchestrations by industrial nations to devalue the U.S. dollar. The two-year, 50% greenback devaluation had begun in 1985, inked by central bankers and finance ministers from the United States, France, Germany, Great Britain and Japan. By 1987, the confab was enlarged to encompass Canada and Italy.

Crow is now a senior member of the G-7, sharing top billing with only one other -- French central bank governor Jacques de Larosiere.

Here are edited excerpts of his interview with Futures.

Q: How best is interest rate and currency policy coordination achieved by the G-7?

A: One has to maintain a certain reserve about plunging into coordination. The secret to G-7 meetings is to what extent you can really invest the time and effort in the staff work beforehand and get the issues sorted out.

The less successful meetings have been where people basically try and force things at the meeting itself, a kind of a pressure cooker meeting. Those are very difficult to manage, to predict. Some meetings are better managed than others.

Eighteen months ago, it was a difficult period in terms of people's ability to manage (meetings). The United States and Germany were engaged in mudslinging and others weren't appropriately sensitive to how slow their economies were becoming.

The more management you can do beforehand and the more sensitive to the nuances of other people's positions, the better. Those things do matter.

Q: What should the G-7 avoid?

A: There should not be so much emphasis on the communique. Too much time and effort is put into writing the thing, because you know people are going to ponder every comma and adjective...

My experience is the only thing the media really pays attention to is, is there something about exchange rates? That's the easy headline. If there isn't something about exchange rates, interest wanes dramatically.

The problem with exchange rates is, often as not, you're wiser to say nothing rather than anything. Almost anything you say can be used against you. But the problem is, when you have a communique, what do you say?

Q: How best should the communiques be interpreted?

A: These are agreed communiques. They're hardly works of literature. They're supposed to get across five or six points with agreed language, which can tend to be the lowest common denominator.

It would be helpful maybe not to have communiques every time. …

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