Ever since a credit crunch that started with the U.S. subprime mortgage crisis spread to other parts of the world, there have been mounting calls for reforming the current international financial system from all over the world.

As Henry C.K. Liu, a Chinese American commentator on economics, put it in an open letter to the G20 summit in Washington last week: "The winter of 2008-2009 will prove to be the winter of global economic discontent..."

The letter, published by Asia Times on Nov. 8, blasted neo-liberal economists who "fooled themselves into thinking that false prosperity built on debt could be sustainable with monetary indulgence."

It advocates a new international financial architecture based on an updated 21st century version of the Keynes Plan originally proposed at Bretton Woods in 1944.

"This new international financial architecture will aim to create (1) a new global monetary regime that operates without currency hegemony, (2) global trade relationships that support rather than retard domestic development, and (3) a global economic environment that promotes incentives for each nation to promote full employment and rising wages for its labor force," said the letter signed jointly by American macroeconomist Paul Davidson and dozens of other leading world economists.

The proposal presents a rosy blueprint, but on the ground, the world has not gathered enough dynamics to rebuild a new financial system.

U.S. defends self interests

Though other nations blamed the financial storm on the failure of free-market capitalism in the United States, U.S. President George W. Bush stood firm against calling into question the very fundamentals of "democratic capitalism," and against excessive regulation.

It is "essential we preserve the foundation of democratic capitalism," Bush said while meeting with French President Nicolas Sarkozy and European Commission President Jose Manuel Barroso last month.

Bush reiterated the U.S. position at the G20 summit, saying one objective of the leaders' meeting was to reaffirm "our conviction that free market principles offer the surest path to lasting prosperity."

But he admitted that both the International Monetary Fund and the World Bank, the two main international financial institutions created in 1944 in Bretton Woods, should be modernized.

The joint statement of the summit did not mention the creation of a global financial market enforcer as demanded by some European and emerging countries but opposed by the United States.

As for calls to end the U.S. dollar's hegemony as the sole world currency, U.S. close ally Japan voiced support for the dollar-centered currency system at the summit.

"There is a voice questioning if it's stable for the U.S. dollar of the world's largest debt country to continue to be a key currency... But our prime minister stressed (at the summit) that no currency but the dollar can be used as a key currency," a Japanese official told reporters.

EU pushes hard for reforms

Earlier this month, European Union (EU) leaders gathered in Brussels and turned up the rhetoric with calls for an overhaul of the current global financial system in the wake of the financial crisis.

British Prime Minister Gordon Brown had called for a reshaping of the International Monetary Fund, a Washington-based institution born of the 1944 Bretton Woods agreement, as the keystone of global market regulation and an early warning system for the global economy.

He called on national authorities to set up 30 supervisory colleges that would cooperate in regulating major cross-border financial institutions.

In addition, the EU eyes tougher regulations on hedge funds, new rules for credit-rating companies and limits on executive pay.

French President Nicolas Sarkozy also raised the issue of world monetary system in the future, a move seen by some analysts as a challenge to the long-time dominance enjoyed by the U.S. dollar.

European leaders proposed a 100-day deadline for drafting the overhaul of the financial system.