G20: invented late 2008, dead 2 y. later?

Chronicles of a currency war

G20 was the hurried up way to fully incorporate BRICs into financial regulation and fiscal policy coordination and global decision making (as for monetary policies, they are are alreadly informally coordinated, inasmuch as possible and sound, by the CBs “club”). We discussed at length its first moves in this blog (see December 2008 posts).

At the first real crisis, 2 years after it doesn’t work AT ALL. To make things simple, Obama has no more a proper leadership (max, just agenda-setting powers), and Chindia is not yet nor soon the new Empire (and such an empire will substantially depend upon the path eventually leading to it).

The sharp division created on the one hand by “helicopter” Bernanke’s $0.6 trillions QE2, and on the other by yuan’s under-valuation by an est. 19% (source:  Peterson Inst. of Int.l Econ.), would have been quite easy and straightforward to deal with and solve, had a proper bargaining environment been there. It wasn’t.

The near future will tell us if it is just the G20 who’s dead, or the willingness to bargain, or both.

Inspired by the noisefromamerika blog style, and specifically by a quite similar table (same structure) at page B14 in  Folha de S.Paulo today, here is its last outcome.

EXPLAINING THE G20 FINAL DOC

IT SAYS\IT MEANS

1. exchange

To evolve towards exchange systems more market determined: by stressing the exchanges’ flex in order to reflect the underlying fundamentals, and avoiding competitive devaluations.

This point is FULLY anti-Chinese, because this is the country whose exchange control is more striking, and particularly US-annoying (the US leaders being so stupid, that they do not want to change their economic base, even after such a momentum crisis; if they had a proper Industrial Plan, they wouldn’t care much about the yuan). Message: China must undervalue, but under-valuation in general must not be used as a weapon, a pro-X (eXport) policy (a basic lesson from the 1930s katastrophe’).

2. Flow of capitals

The advanced economies, incl. those issuing reserve-currencies, will vigilate against disordered changes in the exchange rates. Their actions will help to prevent an excess volatility in the ST capital influx towards some emerging countries.

This is the compensating anti-US point. The yankees must stop to print money in order to buy credit. In Brazil as in China and elsewhere, Helicopter Bernanke’s $ create speculative K inflows, hence potentially Greenspan-style bubbles in commodities or housing. No, thanks. $ go home!

3. Disequilibria

The IMF might play a role here, by developing further the MAP (Mutual Assessment Process). The final target is ambitious: to match external stability together with fiscal, monetary, financial and exchange consistency.

Obama’s +\- 4% GNP  threshold (for S-I = X-M surpluses) has been thrown to the garbage. Now the IMF “arbiter” must deal with the hot potato, and is called to some persuasion hard job. But the Empire-like (centre-periphery)  divergence between over-saving BRICs and under-saving North Atlantic old powers is always there, and no one knows how to deal with it. Empires’ history tells how to do (read Marcello de Cecco, e.g.).

4. Safety nets

Make stronger the global financial safety nets, in such a way as to help the countries to cope with financial volatility.

If one country is financially sound (not Greece), but is hit by a financial exogenous choc, it will have title to receive credit and emergency help.

5. IMF reform

The leaders approve their Ministers’ decision to widen the participation of dynamic emerging countries to IMF shares.

BRICs and NICs will put more money in the IMF, hence get more power. The IMF’s architecture will (in part) close the gap with the economic geography of the real world.

6. Financial system reforms

The financial system regulation must become stronger, with tighter capital and liquidity requirements.

Here was the G20 good start, with the Commission coordinated by Draghi, which has been working meanwhile. Vikram Pandit, the Citi’s CEO sent a mafioso message to the G2o on the Financial Times: to impose higher capital and liquidity standards might have a significant negative impact upon banking systems, consumers and economies. Here the G20 returns compact once, in order to face the Financial Criminals that did  not respond anywhere of their sub-crimes. But the banks have already won the game. The proof is that Mr Pandit, after blackmailing all the past and future superpowers and their intelligences, is still alive.

7. Fiscal policies

Advanced countries must adopt such fiscal re-adjustment plans as to be “clear”, and “pro-growth”. Paying atn that they risk to deteriorate the economic recovery.

Leaders come over one year of impasse (US versus EU, lead by “Empire of austerity” Germany) between applied “keynesism” (keep State budget deficits high) and avoiding Sovereign debt collapses (reduce State deficits). The inner ambiguity of the issue is recognized.

8. Doha Round

A strong commitment to a success of the commercial liberalisation.

They keep saying it, but they don’t really mean it.

The reality of the 2007-2011+ crisis is of course against free trade (at least temporarily). Doha Round never took off since from its start in 2001. Now it’s unofficially dead.

At the opening of the G20, two closest allies such as the US and SK could not announce a bilateral free trade agreement. That was the sign that the atmosphere was really, really bad.

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apertura Tokyo?

The last  weekend was SO full of events. Samples:

– Sat’day, at the annual Forex meeting, min. Tremonti strategically innovated language; now, besides toxic there are radioactive financial products as well; they are riskier, but easier to detect if you want to (we decode so, the language creativity of the Minister so friendly with banks);

– Sunday in Berlin, the European summit confirmed that, as G20 started being useless at its 1st meeting last Nov. (see our post at the time), it will carry on even worst than that. First of all, they took an infinite list of engagements by March, we wonder what they are up to (perhaps they just delegated everything to the already established international committee coordinated by Mr Draghi – that’s the 1st reason why G20 is useless).

2nd: they don’t answer the FAQs. As prof. Masciandaro put it at “Focus Economia” (radio24) on Monday the 23rd:

FAQ 1. What is bank and what is not (the spread of shadow finance under a savage deregulation regime, allowing reguated banks to hide their risky biznezz in the shadow).

FAQ 2. Wh’happens when a bank becomes a State or para-State institution? The issue of credit becoming a field invaded by  political imperfect competition, with its fights and retaliations.

FAQ 3. Wh’happens to the entire, multi-authority commercial credit-finance-insurance control system, as the controller (State) becomes also the controlled instance (State Bank)? The required controlling agencies-system change, in order to guarantee, and re-establish independence of control.

alphaville

Overnight markets: Weak start
Posted by Gwen Robinson on Feb 23 04:10.
Asian stocks were mixed on Monday, although technology and finance companies rose largely on speculation that the US government will raise its stake in Citigroup to ease the global financial crisis.  Futures on the US S&P500 Index rallied 1.2% following the Citi news, after the index dropped 1.1% on Friday.
Asian markets (Mon)
04:10am GMT
Nikkei  down 51.49 (-0.69%) to 7,364.89
Topix down 8.41 (-1.14%) 731.12
Hang Seng down 230.27 (1.81%) at 12,929.44

bloomberg

http://www.bloomberg.com/apps/news?pid=20601087&sid=auE35pAayCxs&refer=home

Asian Stocks, U.S. Futures Advance on Citigroup Speculation

By Shani Raja and Chan Tien Hin

Feb. 23 (Bloomberg) — Asian stocks and U.S. futures rose on optimism that the U.S. government will raise its stake in Citigroup Inc., reducing the risk of bank failures. Treasuries and the dollar fell.

wsj

Tokyo Falls on SFCG Bankruptcy; U.S. Futures Gain on Citigroup

SINGAPORE — Asian share markets were mixed Monday with the Nikkei lower as financial services company SFCG filed for bankruptcy protection, and some other indexes higher on hopes the U.S. government would secure the future of Citigroup.

U.S. stock futures rose 1% and Treasurys fell after people familiar said that Citigroup was in talks that could result in the U.S. government substantially expanding its ownership of the bank.

ASPETTANDO TOKYO …

Mi veniva in mente una canzone, noi in coro in fondo al pullman, davanti don Rino (futuro Abate sulla cattedra di San Zeno, Verona), al ritorno delle gite di  Gioventù Studentesca.

L’ho appena ricalibrata – in primis da  monsignori a lorsignori. E’ la secolarizzazione …

E colapele – de’ lorsignori, – farem scarpelowcost ai – lavoratori …

sulle note di avanti o popolo.

Va nella linea, ormai certa (nel dibattito strisciante) di Politica Industriale in Occidente, di sbaraccare le varie Cattedrali Detroit /anzi, a momenti di liberarci delle loro macerie) e mettersi a fare anche qui del low cost manifatturiero, anche un po’ manuale, ma dev’essere sui generis. Appunto!

Ma  è una cruna di ago.

Bisogna costruire – con NUOVI supporti istituzionali di governance inter-regionale nel mondo, e qui casca l’asino –  un disegno sofisticato, demanding di DdL: lo accenna alla fine anche  un  rapporto Istituto Levy (gli eredi di Minsky, in senso proprio) di inizio anno:

http://www.levy.org/vdoc.aspx?docid=1109

Published in: on February 23, 2009 at 6:55 am  Leave a Comment  
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G 20: the real start is in April – RIMANDATI AD APRILE

Photo: January 30, 2007. REUTERS/Jason Reed

The Times cartoon. © Peter Brooks

0811_st-barack

QUASI BOCCIATI, RIMANDATI AD APRILE.

ITALIAN SUMMARY.

ASPETTANDO B.Ob. LA TELA DI RAGNO DI GORDON BROWN, laburista annacquato.

LI PENSAVAMO BOCCIATI; INVECE SON SOLO RIMANDATI AD APRILE: e’ un risulato magro ma sopra le aspettative.

Il G20 era atteso come  un buco nell’acqua, invece ha sorpeso, pur senza entusiasmare affatto:

– da un lato, ultimo grido liberista del 2° Millennio, seppellito nel marzo-settembre 2008

– dall’altro, un primo vagito del nuovo millennio Chindiano che avanza: focus sulla regolazione forte (?) della Finanza, anche se .. leggete il testo finale integrale: final statement. Le rating agencies? Devono … registrarsi, e’ tutto. Ma erano ben note e nelle dita di una mano!  Niente guillotine per  il loro top management, non una notte in prigione e nemmeno a casa senza liquidazione. Il FT le aveva trovate con le dita nella marmellata: usavano modelli TRUCCATI per valutare il rischio, lo sapevano e coprivano per mesi e mesi, continuando a barare.  Al confronto, il Watergate era una cosa da educande.

– Occhio Obama: col gradualismo alla Gordon Brown non si va da nessuna parte, si lasciano tutti gli attori e le istituzioni-chiave al loro posto. CI VUOLE UNA RIVOLUZIONE (al momento senza nome, così sarà più creativa ed al passo coi problemi).

 

AND THE WINNER IS …

Surprise surprise: Gordon Brown again, the win-win guy of global summits! 

For  a sorting out lame-duck (GWB, US), another one (GB, GB) stays with us forever. Gordon Brown had reached below zero poll evaluations, for his treacherous delaying tactics on Northern Rock: oh, dear! He was so shy and  timid (Blair complex?),  before statalism became fashionable again (the real Millennium cut is in 2008, either March or September). But now he’s the star, at least before B.Ob. enters the stage.

wsj

 

Brown Wins Reform Demands

U.K. Prime Minister Gordon Brown appeared to win many of his key demands to reform the global regulatory system and restart the Doha round of trade talks at the meeting of G-20 

As expected by everybody, lame duck GWB did not get anything from  Sat. 15th G20 meeting. Markets didn’t bet a buck on such a meeting, so perhaps they will not fall down dramatically on Monday. The G20:

+ has already become a focal institution (as Gordon Brown has underlined), and will have some work to do next year, particularly in the next meeting before April 30. First of all, verify whether the March deadline (see G20 document below) has been met for the emergency Global Finance re-regulation. By now the G20:

did not start any coordination of fiscal stimuli (from now on  the focus of policies), nor of  monetary and credit policy guidelines; in such a way, national and (at most) regional policies are already ending up: either  in “beggar your neighbour”; or becoming a ground for knittimg new international alliances: e.g., see the rge discussion on China’s fiscal plan:

the timing of the Chinese package is likely influenced both by domestic demands, and the external outlook. The timing before the G20 heads of state is clearly significant.

 

The hypothesis sounds right to me. China is trying to knit alliances around the US, to decouple.

+ dealt mainly with the financial meltdown, with a gradual approach (not mentioning the roots of today’s problems);

+ further work might follow, namely in the FSF coordinated by Mr Draghi, which should include BRIC and deal with change in  Bretton Wood institutions;

  –  no real finance reform, nonetheless: look at RATING AGENCIES (perhaps the most bastard subcriminals, the FT found them conspiring and treaching). They just need to … register !!!  Fuckoff.

 Pleaded for pursuing an “Open Global Economy”, AS IF it was not a dead walking: sooner or later bailout protectionism will give the floor to trade protectionism and capital controls; we bet the deadline of resurrecting the Doha Round by December  will NOT work;

apparently ignored the risks of an open deflation, signalled by the lack of response of gold and stock markets to the massive national rescue plans.  

∑ – Final G20 mark: – 5 + 3 = -2.  Only such a nerd as G Brown gets good marks! The other pupils most come back in the April session, with new essays 2B evaluated.

Even if its financial and institutional (IMF and WB) plan had to be timely applied, this would not change much of the current severe global recession by insufficient demand, on the verge of degenerating into a low consumption-led depression in the US – on behalf of the irresponsibility and laissez faire of Pres. Bush and his staff, even after the subcrime bubble imploded in August 2007, i.e. 15 months ago: 15 months lost, waiting for Godot. Luckily Godot is about to come from Chicago. This is why Russia asked to recall the G20 soon, and got it.

The real test will be whether their minimalist approach to focus upon an immediate stabilisation of financial markets will get any result soon. Dedline: March 31. This is the core of their long final statement:

9. We commit to implementing policies consistent with the following common principles for reform.

• Strengthening Transparency and Accountability: We will strengthen financial market transparency, including by enhancing required disclosure on complex financial products and ensuring complete and accurate disclosure by firms of their financial conditions. Incentives should be aligned to avoid excessive risk-taking.

• Enhancing Sound Regulation: We pledge to strengthen our regulatory regimes, prudential oversight, and risk management, and ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. We will exercise strong oversight over credit rating agencies, consistent with the agreed and strengthened international code of conduct. We will also make regulatory regimes more effective over the economic cycle, while ensuring that regulation is efficient, does not stifle innovation, and encourages expanded trade in financial products and services. We commit to transparent assessments of our national regulatory systems.

 Promoting Integrity in Financial Markets: We commit to protect the integrity of the world’s financial markets by bolstering investor and consumer protection, avoiding conflicts of interest, preventing illegal market manipulation, fraudulent activities and abuse, and protecting against illicit finance risks arising from non-cooperative jurisdictions. We will also promote information sharing, including with respect to jurisdictions that have yet to commit to international standards with respect to bank secrecy and transparency.

 Reinforcing International Cooperation: We call upon our national and regional regulators to formulate their regulations and other measures in a consistent manner. Regulators should enhance their coordination and cooperation across all segments of financial markets, including with respect to cross-border capital flows. Regulators and other relevant authorities as a matter of priority should strengthen cooperation on crisis prevention, management, and resolution.

• Reforming International Financial Institutions: We are committed to advancing the reform of the Bretton Woods Institutions so that they can more adequately reflect changing economic weights in the world economy in order to increase their legitimacy and effectiveness. In this respect, emerging and developing economies, including the poorest countries, should have greater voice and representation. The Financial Stability Forum (FSF – directed by Mr Draghi, NdR) must expand urgently to a broader membership of emerging economies, and other major standard setting bodies should promptly review their membership. The IMF, in collaboration with the expanded FSF and other bodies, should work to better identify vulnerabilities, anticipate potential stresses, and act swiftly to play a key role in crisis response. 

Today’s rge is full of interesting clusters on G20 related issues:

  •  G20 Nations Agree More Concerted Efforts, Regulatory Coordination
  •  Will Coordinated Policy Interventions Prevent a Global Recession?
  •  Towards A New Financial Order: Regulatory Issues Tackled At The G-20
  •  Liquidity Trap Possibility: What’s the Solution?
     G20 Nations Debate Coordinated Fiscal Stimulus
     Economists Debate: What Should Be Accomplished at the G20?