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G20 Seoul Summit Delivers Fake Commitments Once Again

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The G20 summit held in Seoul on November 11 and 12 has failed to reach a concrete agreement to address the rising fears of a currency war. It has also failed to bring out guidelines for curbing trade imbalances as envisaged by the world countries amid discouraging conditions of multi-speed growths for various economies. The fifth communique issued by the G20 countries since the financial and economic crisis broke out in 2008 repeats its rhetoric of addressing concerns of the most vulnerable, providing social protection, decent work and also ensuring accelerated growth in low income countries, or least developed countries.

Jobs at Heart of Recovery!

The communique said the G20 countries were determined to put jobs at the heart of the recovery, which is just a big lie. The leaders of the developed countries and the emerging market economies (EMEs) are not even slightly ashamed to proffer this empty commitment, where at least 100 million have been stripped of their jobs and 120 million human beings have been pushed into hunger after the unprecedented worst global economic crisis since the Great Depression was unleashed by the greedy global financial conglomerates. G20 Seoul

There have not been serious attempts to create jobs throughout the world; instead, jobs are lost every day as a result of the austerity measures in European Union countries and jobless growth in the US. A number of economists and analysts, along with Nobel laureate Paul Krugman, have dubbed the growth that we are witnessing as “jobless growth.”

Crisis Contributors

BBC news has quoted Obama as saying there should be no controversy about fixing imbalances “that helped to contribute to the crisis that we just went through.” Obama must have lost his senses or have suffered from short term dementia, G20’s first communique after the financial crisis, and even subsequent communiqués have acknowledged that the financial conglomerates and their risky, greedy financial business practices have created the crisis. There was no mention of trade “imbalances” contributing to the crisis in the G20 communiqués, yet Mr. Obama dared to spell it. If Obama likes to fix imbalances, all well and good, but this kind of miscalculation only contributes to rising trade tensions.

Trade Imbalances

The US and the EU have been accusing China for unfair undervaluation of its currency, the yuan. The US has been particularly critical of yuan value. Its argument has been that China is able to amass trade surpluses due to the artificially low yuan value. It says the yuan should be allowed to appreciate freely, in line with the market movements.  But Germany recently accused the US of announcing $600 billion of QE2, which it says is an indirect measure of devaluation of the dollar. The US has come under attack also from Brazil, India, China, Russia and Japan for its QE2, as it would encourage hot money to flow into emerging economies, and even developed economies, putting upward pressure on their currencies, thereby providing a competitive advantage to US exports. The QE2 move has intensified fears over the supposed currency war.

In this background, currency war and trade imbalances have occupied the top priority in the main agenda of the G20 Seoul conference. A separate meeting during the G20 conference between the two main constituents of the currency war, the US and China, did not produce any solution. Even the European leaders have been called in to help produce a solution to the ongoing heated debate over currency devaluations, but to no avail.

Vague Commitments

They finally have come out with vague statements of framing “indicative guidelines” to tackle trade imbalances. They have said they agreed to avoid “competitive devaluation” without stating any concrete steps to achieve that goal. The leaders have reportedly vowed to follow market determined exchange rates referring to China’s yuan value.

They have pledged not to resort to competitive devaluation, perhaps a reference to the recent announcement of the QE2 by the Federal Reserve. In a bid to address the concern of the EMEs over the flow of hot money, they have been allowed to impose “carefully designed” control measures. One must wonder wht these measures will look like. Perhaps the EMEs need to be careful so that they do not disturb the free flow of globalized capital in the name of curbing hot money. And yet, they should curb hot money flow to prevent inflation, price rises and thus popular discontent in their countries. It is a very difficult task, indeed. And that is the fate of the EMEs resulting from their leaving G77 and becoming members of the G20.

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About Sekhar

  • http://economythoughts.wordpress.com/ Julio C. Spinelli

    I don’t disagree with you on the feeling you have about what is going on. But I would like to explain a couple of macroeconomic points to you and your readers.

    Yes it is true that the crisis was triggered by the excessive greed and fraudulent behavior of a bunch of financiers. And the acquiescence of many so called great men. For instance, if you haven’t done so, please watch the interviews of Moody ex-employees by the Senate committee on financial reform. It came out clear like water that Moody fired or encouraged to leave their top tier employees and replaced them with less skilled ones. That enabled, as described by them themselves, to have a long series of rating meetings, where the new Moody employees felt like they were playing a chess game and loosing every time against the higher skill finance industry players. Thus rating AAA instruments that didn’t deserve that rating.

    But the important macroeconomic point is that this was only a trigger and not the problem itself. The real problem is that there are more than 150 trillion dollars in derivative contracts circulating around in the world that nobody has regulated and nobody has a complete integrated knowledge of. Therefore, too many institutions, pension funds, banks, hedge funds, etc. feel like they are not taking risk because their risk is insured. When in reality if those risks were to play down to the extreme, they are calculated to protect, they would find out that there are not enough hard assets in the world to protect them.

    So half the world is betting on one side and the other half on the other. But neither can happen or the system crashes. What the trade imbalances do is to add instability to an already extremely unstable system. The system is moving towards a metastable equilibrium (like the one you can achieve by standing a piramid on its tip, rather than on its base). What this situation of increasing instability does it to make the trigger necessary to destabilize the system again smaller and smaller. And QE2, by being another form of unbalance, it has just increased the instability of the economic system (not just the financial) by a significant amount, my guess is 20%. If we don’t stop, decrease or somehow manage the trade unbalances, history tells us that things end up badly in the long term. The last time this situation happened, it triggered wold war II. Oh, by the way, 90%+ of all the wars have been fought for financial reasons, mostly taxes.

    I hope to have made myself understandable. Sorry, it is really difficult to explain chaos theory and attractors in a simmplistic way. You can read more of my thoughts at my blog

  • Ruvy

    Sekhar, the real news was not what the G20 did or didn’t commit to over the last couple of days. The real news was that the power of Commie China was demonstrated to the United States in two ways. The first was the firing of an ICBM near Los Angeles to show what the Chinese navy could do. The second was the downgrading of the American sovereign debt by a Chinese rating agency from AA to A-.

    The money line where this article is concerned.

    The reported Chinese missile test off Los Angeles came as a double blow to Obama. The day after the missile firing, China’s leading credit rating agency, Dagong Global Credit Rating, downgraded sovereign debt rating of the United States to A-plus from AA. The missile demonstration coupled with the downgrading of the United States financial
    grade represents a military and financial show of force by Beijing to Washington.

    This report is all over the internet, by the way, primarily from Wayne Madsen, a pay for view site. But there is more. The money lines from this report, originally from Reuters.

    American military chiefs have been left dumbstruck by an undetected Chinese submarine popping up at the heart of a recent Pacific exercise and close to the vast U.S.S. Kitty Hawk – a 1,000 ft supercarrier with 4,500 personnel on board.

    By the time it surfaced the 160ft Song Class diesel-electric attack submarine is understood to have sailed within viable range for launching torpedoes or missiles at the carrier.

    According to senior NATO officials the incident caused consternation in the U.S. Navy.

    The Americans had no idea China’s fast-growing submarine fleet had reached such a level of sophistication, or that it posed such a threat.

    The Chinese power panda is tiptoeing in to let everyone know, gently, at first, that the senior brother of the East Asians is BACK.

    While Americans are busy watching “House, M.D.” and watching as an obnoxious asshole abuses his woman boss, the Chinese are slowly taking over.

    Let me have some chow mein please! Some egg drop soup on the side!

    Chop! chop!