As readers of this blog will know, I believe that the G20 leaders meetings are generally a waste of time and fossil fuels. After each meeting all we ever get is some vague declaration that basically says all the G20 leaders are wonderful with the mainstream media simply rehashing press releases and happy to go along for the ride. The latest G20 gathering in Toronto, Canada, was no different except that more police cars were set alight.
The leaders and finance ministers of the G20 would like us to believe that all nations within the group are working together to deal with the effects of the global economic recession. The fact is that the happy days of spend, spend, spend are over but some nations, particularly the United States, don’t want to accept that.
I almost choked when I heard President Obama suggest that Japan and Europe need to do more to stimulate their economies and create domestic demand. What he is actually saying is that he wants Japan and Europe to go into more debt and toss money around, so that it creates demand for U.S exports.
Thankfully the new Prime Minister in Japan, Naoto Kan, isn’t likely to oblige and as for Europe, nobody seems to talk about stimulus spending any more. Slowly people are once again realising that if you give any government too much money to spend, then they will waste it. Worst of all if you allow a government to borrow a lot of money, then they are likely to be even more wasteful.
The United States has borrowed too much money for a long time and under Obama they now have racked up even more debt. So what is their grand plan to get this debt under control? Well it seems by leaning on another nations to take on more debt so they can but U.S products.
The United States is even trying to squeeze more money out of the Japanese Government in regards to moving U.S Marines from Okinawa to Guam by now saying it looks like the cost will be a lot more and asking Japan to share more of the financial burden for this relocation..
What a nice ally the United States is. If you ever want their “hosted” forces to leave your nation then you need to pay for them to move. It’s a bit like having to put up with an annoying relative in your house, pay for all their meals and entertainment expenses and then hand over your credit card so they can buy a plane ticket to go home.
The G20 leaders did their best to smile for the cameras on cue and Wayne Swan was the centre of attention as people wondered what he has done with Kevin Rudd’s bags. But the G20 is no longer the love-in it once was and it is quite clear from the Summit Declaration that the unity within the organisation has fractured.
For example in paragraph 4 the declaration proclaims:
“While growth is returning, the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels, and the social impact of the crisis is still widely felt. Strengthening the recovery is key. To sustain recovery, we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand. At the same time, recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, properly phased and growth-friendly plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances. Those countries with serious fiscal challenges need to accelerate the pace of consolidation. This should be combined with efforts to rebalance global demand to help ensure global growth continues on a sustainable path. Further progress is also required on financial repair and reform to increase the transparency and strengthen the balance sheets of our financial institutions, and support credit availability and rapid growth, including in the real economy. We took new steps to build a better regulated and more resilient financial system that serves the needs of our citizens. There is also a pressing need to complete the reforms of the international financial institutions.”
What this all means in plain English is that some nations will keep spending and some nations will start cutting debt. There is no longer a unified plan and countries within the G20 are doing now what is in their best interests.
During the height of the global financial crisis everyone was in spend mode and the leaders of the G20 (like Gordon Brown of the United Kingdom) wanted to be loved for throwing taxpayers money around. Now in 2010 people have realised how much money leaders like Brown wasted and how much debt they plunge their nations in and they don’t like it.
Obama is in real trouble because the U.S has lost much of it’s economic authority. He really needs the world to spend and drive up demand for U.S exports, but it is quite clear that he did not get what we wanted from the latest G20 meeting.
Having borrowed and spent hundreds of billions of dollars the Obama Administration now finds itself with the unemployment rate still near 10% and few signs that the economy has entered a period of sustained recovery.
At this rate Obama will find himself getting personal approval ratings as low as Rudd’s. Thankfully for him however, he doesn’t have to worry about a few factional bosses being able to toss him from power.
All we can do now is wait and see how events unfold over the next few months. If the U.S economy starts to show signs of sliding backwards, then investors will start to panic about a double dip type global recession. This won’t be good for the stock market.
Personally I don’t think this will happen, but I am not brave enough to invest much in this environment and am patiently waiting for some signs that the G20 economies can start growing on the basis of private demand and wean themselves off government stimulus measures.