The man once described as the world's greatest treasurer, former prime minister Paul Keating, joins Lateline to discuss the global financial crisis and future economic uncertainty. Great Interview, 20 Minutes...Video link on the RHS http://www.abc.net.au/lateline/content/2008/s2480345.htm Here's a taste from the Transcript TONY JONES, PRESENTER: Joining us now in the studio is the former Prime Minister Paul Keating. Thanks for being here. PAUL KEATING, FORMER PRIME MINISTER: Tony. TONY JONES, PRESENTER: Now let's start with a very big picture, if we can, does this global financial crisis look to you like a two year crisis, a five year crisis, or something much worse, and much more prolonged? PAUL KEATING, FORMER PRIME MINISTER: Well, it's a catastrophe, its way worse than it appears. We have had an expansion of credit running for 60 years from 1947 to 2007. This is the first time, 2008, and now 09, where we have had a contraction of credit. The top 200 financial institutions in the world have suffered an average loss of value of 74 per cent. The top 200, average loss of 74 per cent. We have gone through a bull market which began in 1982, went for 25 years, a bull market in the stock market to 2007. What we need is a completely new global political and economic settlement. We need to get rid of the old G7. We have to be rid of the old IMF (International Monetary Fund), we've got to bring the surplus countries into the, into the political framework. You see, the G7 is made of debtor countries, countries like the United States, Britain, France, Italy, these are all borrowers, there's no surplus countries in that. And if you look at the structure of the IMF, the Chinese get 3.7 per cent of the vote, the Indians get 1.9, the Europeans and Americans get 51 per cent. And there's just no way the Chinese Communist Party is going to hand over control of their currency and their political fortunes to a Washington based US Treasury run institution. So unless there's going to be a complete resettlement. TONY JONES, PRESENTER: You talk about a new Bretton Woods agreement? PAUL KEATING, FORMER PRIME MINISTER: A totally new Bretton Woods agreement. We're not going to get out of this. I mean this is the United States Budget cannot reflate the world. We've always lived in a position where the United States Budget could reflate the world this is not going to happen now. The Budget this year was going to be $850-billion, now look President Obama is talking about another trillion, so $1.8-trillion, their GDP is 13-trillion, so they'll be running a Budget deficit this year of 15 per cent of GDP, they'll have to do this for three or four years. Sixty per cent of American GDP, who is going to buy the bonds? Now every serious American policy maker knows that they are not going to be returning value, in the end they'll inflate their way out. So in other words, you'll buy American Treasury bond, but what you get back in return will be an inflated dollar, so you'll get back 50 per cent of real value, or something, in other words the debt will be so overwhelming that it cannot be repaid. And you'll start to see in the price of gold, if this goes on for a couple more years, the real serious question of an American default, a default by the United States Treasury. So this is what we are dealing with now. TONY JONES, PRESENTER: Just to add to that point, I mean already in Europe there's a serious fear of sovereign risk, that is- PAUL KEATING, FORMER PRIME MINISTER: Sure. TONY JONES, PRESENTER: That is the bank guarantees that some of those countries have made, may not be met. PAUL KEATING, FORMER PRIME MINISTER: May not be met. Well that's right. Look at the G7 you've got Germany, France and Italy, all three countries belong to the same currency unit, the euro. So why are the three of them there? Italy has got a national debt of the 110 per cent of GDP. They're not going to be any help to anybody. Yet I notice at Davos, Tim Geithner the new US Treasury Secretary hopped into the Chinese about the manipulation of their currency, and of course Wen Jiabao, the Chinese Premier batted that back, the Chinese are not about to deliver themselves into the hands of the IMF or Tim Geithner or any such American officer. So, but they're expected to continue participating in the US Treasury bond tenders. Now, until we get a settlement, a true settlement where the great states like India and China and their big economies and the surplus countries like Russia, the oil states of the Middle East, get a greater say, in other words until we get to a representative world structure of power, that is global political power and global financial power, then that's the only way now I think confidence will really return to this. This can't be done by the Americans.