Anyone with an ounce of common sense knew the G-20 conference would be a failure. The only question was what form the failure would take. In the typical conference of this nature there is some early fireworks and then a coming together in a “Kumbayah” agreeing to agree moment.
This year, differences are so huge, the G-20 could not even agree to agree. Instead they agreed to postpone agreement.
Don’t let the following headline fool you, look beneath the surface: G20 leaders near agreement, if not progress
The G20 will agree to setting vague “indicative guidelines” for measuring global imbalances and hammer out the details next year, G20 sources said on Friday, effectively calling a timeout to let tempers cool after heated debate over currencies.
“It was very hard work,” said one G20 source after a negotiating session that ended around 3 a.m.
Leaders are expected to call on the International Monetary Fund to develop a range of indicators to identify when imbalances pose a threat to economic stability. G20 finance ministers will consider the findings at a meeting in early 2011, according to a draft statement obtained by Reuters.
An earlier version of the document showed negotiators debating over whether those indicators ought to be “measurable” or “quantitative and qualitative.” In the end, neither phrase was included, suggesting the G20 failed to agree on the wording.
Grinding Towards Accord?
Please consider the following fluff statements in the Bloomberg article G-20 Grinds Towards Currency, Trade Accord After Talks
South African Finance Minister Pravin Gordhan said leaders and their aides had made progress in coming to agreement on how to address global imbalances.
Australian Prime Minister Julia Gillard said “some work” still needed to be done on bridging divides over currency valuations.
Some work needs to be done? Really? That’s like planning a trip to Mars, drawing a picture of a rocket ship with a crayon and proudly announcing “some work needs to be done”.
Moreover, Gillard’s statement looks nonsensical in light of positions taken by China, Brazil, and Germany.
“Don’t make other people take the medicine for your disease,” Yu Jianhua, a director general at China’s Ministry of Commerce, told reporters in Seoul late yesterday. “Quantitative easing will have a very big impact on developing countries including China.”
The G-20 meeting of finance ministers and central bankers last month agreed to move toward “more market-determined exchange rate systems” and make efforts on “reducing excessive imbalances.” The U.S. Federal Reserve a week later said it would pump $600 billion into the economy to spur growth. Brazil, Germany and China said the move would drive down the dollar and fuel speculative capital flows that risk asset bubbles.
China is seeking to modify the language on trade imbalances in the summit communique, said a German official taking part in the talks who requested anonymity because he isn’t authorized to speak publicly for the government.
Trade War Looms
Yahoo!Finance has a much more believable headline. Please consider Specter of trade war looms as G-20 nations gather
Leaders of major economies faced the urgent task at their summit Friday of resolving currency disputes that have raised fears of a global trade war.
A dispute over whether China and the United States are manipulating their currencies is threatening to resurrect protectionist policies like those blamed for worsening the Great Depression. The biggest fear is that trade barriers will send the global economy back into recession.
Hopes had been high that the Group of 20, which includes wealthy nations like Germany and the U.S. and rising giants like China, could be a forum to forge a lasting global economic recovery. Yet so far, G-20 countries haven’t agreed on an agenda, let alone solutions to the problems that divide them.
The delegates have clashed in particular over the value of their currencies. Some countries, like the United States, want China to let the value of its currency, the yuan, rise. That would make Chinese exports costlier abroad and make U.S. imports cheaper for the Chinese to buy. It would shrink the United States’ trade deficit with China, which is on track this year to match its 2008 record of $268 billion.
But other countries are irate over the Federal Reserve’s plans to pump $600 billion into the sluggish American economy. They see that move as a reckless and selfish scheme to flood markets with dollars, driving down the value of the U.S. currency and giving American exporters an advantage.
Richard Portes, president of the Center for Economic Policy Research in London, said the dim prospect for a substantive agreement “is very dangerous for the world economy.”
Portes said he fears “the possibility that currency wars and global imbalances might lead to severe trade protectionism over the next year or so.”
For now, the G-20 countries are expected to agree on noncontroversial issues, like an anti-corruption initiative and the need for oversight by the International Monetary Fund.
But they’re finding no common ground on the most vexing problem: how to address a global economy that’s long been nourished by huge U.S. trade deficits with China, Germany and Japan.
G-20 Countries Can’t Even Agree on the Agenda
In case you missed it, here is the key sentence from the above article: “So far, G-20 countries haven’t agreed on an agenda, let alone solutions to the problems that divide them.”
Not only is there “some work” to be done as Australian Prime Minister Julia Gillard gingerly puts it, the G-20 committee cannot even agree to an agenda!
Hells bells, they cannot even agree on whether or not the results should be “measurable” or “quantitative and qualitative.”
I believe that proves my allegation that Geithner’s Four-Point Plan for the G-20 is Nothing but a Wish-List
Thus, unless things change rapidly in the next few hours, the only recognizable achievement of from the G-20 summit, will be an agreement to postpone the agreement.
Mike “Mish” Shedlock
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