unserer besonderer Freund Ambrose Pritchard-Evans gegen Merkel und Sarkozy:
As we sit in this construction site in outer Docklands -- wondering what on earth the greatest concentration of world leaders in half a century must think of such a G20 venue, Saudi King Abdullah for instance - it is worth adding up the score in the stimulus war.
This is a not a fight between the US-UK on one side, and Europe on the other.
This the entire world on one side, and France-Germany on the other. (Why France is playing this bizarre role when social order is breaking down across the French industrial heartland at an alarming pace is a story in itself)
Japan, China, India, and Brazil have all -- to varying degrees -- backed extreme stimulus to prevent the collapse of global demand.
India's premier Manmohan Singh said the boost of offer at the G20 is "too little" to ensure to stop worldwide unemployment exploding next year. (The International Labour Federation warns that 40m will lose their jobs this year alone)
Japan's Taro Aso is pushing through a third fiscal plan, this time near $200bn over three years. He said Germany fails to understand the need for emergency action at key moments to stop an economy tipping into a downward spiral - a lesson learned the hard way during Japan's Lost Decade. (It should have been learned hard in Germany too from the Bruning deflation of 1931 - but Germans have forgotten their history)
No doubt German Chancellor Angela Merkel is right - in a very narrow sense - that indebted countries cannot keep piling up more debt as if there was no tomorrow. But there is a deeper issue that seems to elude her entirely.
Global demand is contracting. The deficit states (US, Spain, UK, South Africa, Australia, Greece, Eastern Europe) cannot - and should not - carry the main responsibility for keeping it buoyant. That would merely perpetuate the vast imbalances that lie behind much of this crisis.
So if the surplus states refuse to step into the breach, global demand will collapse. The mercantilist export powers are already being hit hardest by this downturn. Japan's exports fell 49pc in January: Germany's GDP has been contracting at 8pc or so (annualized) over the last six months, the worst performance of any major economy in the Atlantic region - although the bitter phase of mass unemployment is yet to come.
This is the plain reality, whoever you blame for causing this crisis. Mrs Merkel - daughter of Lutheran clergyman -- seems to have a moral view that somehow there are good imbalances (Germany's surpluses) and bad imbalances (America's deficits). This is frankly childish. The global economy is a single organism. All imbalances are bad when they become extreme.
Until Germany (and China) comes to terms with this elementary point, we will not start to reconstruct the global system on a sound footing. Her comments to the Financial Times that Germany intends to carry on building up trade surpluses forever as if nothing has happened are shockingly stupid.
Barack Obama gave her a clear enough warning yesterday that America will not continue to keep the spirit of free trade alive in Washington if its own precious stimulus keeps leaking out to free riders that refuse to reciprocate. The US will have to tighten its belt gradually and bring its own trade and current account deficits back into balance.
"If there is going to be new growth it can't just be the United States as the engine. Everybody is going to have to pick up the pace," he said.
"The US will do its share but in some ways the world has become accustomed to the United States being a voracious consumer market, the engine that drives a lot of economic growth worldwide," he said.
Then the sting: "To the extent that all countries are participating, that strengthens arguments we make in our respective countries about the importance of world trade, the sense that this isn't a situation where each country is only exporting and never importing, but rather that there's a balance," he said.
The core economic issue of our time -- which this G20 is dodging -- is whether or not the surplus states will at long last accept that they can no longer feast on Anglo-Saxon demand and instead take steps to change the structure of their economies.
If they don't come up with some way of doing this gently, then it will be done to them brutally.
Brutal Method One is to stuff them on the exchange rate. This has already occurred with sterling. Hence the European crowds in London - and mostly welcome they are too -- creating a tourist miniboom that has kept London afloat. Hence, too, Britain's fast narrowing current account deficit, now just 2pc of GDP.
It is occurring with the dollar too to some degree. The high euro is hollowing out Europe's core industries. With a lag, this will be reflected in a slow rebuilding of America's industrial base. Note how EADS-Airbus is building plants in America.
Brutal Method Two is the more radical option of a closed trade bloc that shuts out exports from mercantilists. That would be truly ugly.
We are not there yet. For now we watch this G20 fritter away its energies on side-shows, or bread and circuses for the mobs. Tax havens, hedge funds, wars on bankers - it is pathetic.
I have nothing against this witch-hunt as such. Ritual sacrifice is important, and some deserve it - especially Sir Fred Goodwin, who wrecked my bank. If this is what it takes to rebuild public support for free markets in our democracies, fine.
But let us not pretend that this touches on the true origins of our crisis, or offers any solution.
As readers know, I always blamed the credit bubble on two forces. Interest rate were held too low in much of the world for stretches of the last 20 years, especially in America - but also in Europe where the ECB rates kept at 2pc (to help Germany when Germany was down) destabilized Club Med and Eastern Europe. Cheap Chinese good flooding the world kept killed inflation, so central banks in thrall to the primitive religion of "inflation-targeting" were seduced. The stimulus fueled asset booms instead.
The other force was a $6.7 trillion reserve accumulation by China, Japan, and other export states, which recycled their surpluses into dollar (and euro) bonds to hold down their currencies. This pushed long-term yields to historic lows. Add in the Japanese carry trade as zero rates in Tokyo pushed $1 trillion into the world, and you have a royal mess.
Governments and central banks were responsible for making credit too cheap - encouraging debt, and punishing savers. It was they who sent a warped signal to the markets, guaranteeing a warped response.
Bankers were merely the agents, the expression of something deeper. This was a government-created crisis. It would never have happened in a genuinely free market. Let us never forget that.....
Kommentar von Joseph:
The French and Germans have an educated society to deal with,and dont tolerate thier priveleged mouthpieces in the media, talking a load of bollocks.the case is the opposite in england,our media excels in irrelevant garbage which sound intelligent ,if your thick,or there is a vacuum between the ears, or giving us thier priveleged masters ,thier agenda.
blogs.telegraph.co.uk/.../2009/04/02/the_g20_has_lost_the_plot
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