Will the Group of 20 adopt the FDR Framework to bring the world back from the brink?

As the Group of 20 meets in Cannes, will it adopt the FDR Framework to bring the world back from the brink?

Regular readers know adoption of the FDR Framework allows banks to be used as the safety valve between the excessive debt buildup and the real economy.

If the FDR Framework is adopted, banks will be required to disclose their current assets, liabilities and off-balance sheet exposures as of the end of each day.  With this data, market participants can monitor the risk of the banks as well as their progress in retaining earnings to restore a positive book value.

Banks will have to restore a positive book value because they are going to have to take write-downs on the excessive debt built up in the system.

The alternative to this orderly debt write-down is a much more chaotic debt write-down that also splinters the European Union.

Given their choice between inflicting losses on the banks or agreeing to austerity and depression like economic performance, countries like Greece are going to opt to inflict losses on the banks and exit the EU.  After all, Iceland has shown that country's that make the banks take losses can recover very quickly.