The G20 Summit faced a conundrum on Saturday: its members wanted to make sure credit is available to those who need it, while also making sure that banks would tighten their lending standards in order to avoid high-risk behavior. The solution implicitly found is to continue carrying out easy monetary policy as well as designing a series of agreements that give the IMF, the Financial Stability Forum, and others a greater role. The steps taken revolve mostly around greater transparency, adequate disclosure, capital requirements (etc.), and give international bureaucrats more things to do.

The good news is that the world has been, so far, spared from Nicolas Sarkozy’s idea of creating a new international structure of control of financial markets and the G20 members agreed to “reject protectionism.” The bad news is that what has been decided will not fundamentally change the incentives in the system and will still leave the door open to bad policy in the future.

Gerald O’Driscoll has a very good Op-Ed today in the Wall Street Journal in which he addresses the current situation and offers commodity money as its best solution. It may be the case that the opportunity to return to a commodity money system is now greater than one may believe. Considering the type of solutions that the G20 summit delivered, it is thinkable that if some leader were to push for a return to gold in order to prevent future financial meltdowns, people would listen. It would have to be done right of course, considering the mess that was done in the past with the various systems based on commodity money. This would also be the opportunity to kill Keynes’s unfortunate assessment of gold as commodity money, which has been in the minds of many for decades.