ewart s williams : coping with the international financial crisis address by mr ewart s williams, governor of the central bank of trinidad and tobago, at the grenada chamber of industry & commerce 20th annual banquet and awards ceremony, st george, grenada, 22 november 2008. * * * salutations : the honourable tillman thomas – prime minister the honourable nazim burke & mrs. burke – minister of finance mr. george harford – director mrs. yvonne gellineau - simon – president mr. richard duncan – managing director i am pleased to have this opportunity to address you at your twentieth annual banquet and awards ceremony. let me congratulate the grenada chamber of commerce firstly for your longevity ( surviving since 1921 is an enormous achievement ) and for your service to grenada in general, and the private sector of grenada, in particular. from time to time, policymakers in the caribbean tend to take the private sector for granted, or rather fail to capitalize on the enormous advantages that could derive from close private - public sector collaboration. large countries with large markets could depend on the forces of the market mechanism, although as recently seen in the us, in times of crisis, markets cease to work properly, whereupon close collaboration between public and private sector becomes not optional but the only prescription for survival. small countries, like grenada, need to exploit the synergies inherent in a close private - public sector partnership and institutions like the chamber of commerce need to be at the centre of this partnership, for the good of the economic development and survival of the country. i am sure that you would agree with me that the last few months have seen unprecedented events as regards geopolitics and the world economy. even his ardent critics will concede that the election of barack obama as president of the united states was nothing short of momentous. here is someone who four years ago was a little - known first term senator, but who was able to organize a crusade and kindle such passion to become the first africanamerican president of the u. s... for many, that ’ s pretty close to a miracle. and for many, the events that are continuing to unfold in the global economy are no less momentous and even less explicable. the very respected alan greenspan, the former chairman of the us federal reserve, described the recent meltdown in global financial markets as a veritable tsunami. us treasury secretary henry paulson, who is now trying to bring some order to

the chaos, insist that the current crisis is without doubt a “ once in a lifetime event ”. what started, in the us, as a well - intentioned effort to facilitate homeownership among lower income wage - earners has now mushroomed into a global financial meltdown with farreaching implications for the major economies as well as for innocent bystanders all over the world. clearly, this is a bit of over - simplification because, while the roots of the turmoil may have been in the sub - prime crisis, this was by no means the only factor. excessive risk - taking by the world ’ s largest financial institutions : overleveraging ( meaning taking risks with borrowed money ) greed, and a disdain for prudential regulation also played substantial parts in a very complex mosaic. what is also incredible is the speed with which this turmoil has unfolded ( it could make usain bolt green with envy ). things appeared to be reasonably under control up to august. september was a difficult month for credit markets following the failure of lehman brothers and the collapse of freddie mac, fannie mae and aig. but october was just unbelievable, as several other major financial institutions failed or had to be bailed out by governments : credit markets seized up, and interbank lending, which is the grease of the international financial system, almost completely stopped. when the dust cleared, the world ’ s major stock markets had declined by an average of 40 percent : the investment banking sector in the us had virtually disappeared, or had been transformed and the world ’ s largest banks and perhaps the largest insurance company were being supported by government funds. the economic slowdown in the us, which had been mild up to july - august, deepened significantly after the credit market seizure in mid - september. in the third quarter, us gdp declined and with an even larger decline in the making for the current quarter, the us economy is now formally in recession, though, to the millions that have lost their jobs ( unemployment is now at 6. 7 per cent, the highest rate for more than two decades ), the recession came some time ago. but the us has lots of company, the uk has been in recession for several months now, and within the last two weeks, germany and japan announced that they were also in recession. governments all over the world have been implementing policy actions to address the root cause of the financial stress and to support global economic recovery. the initiatives have included programmes to purchase distressed