The G20 meeting failed dismally to produce agreement on anything that will make any difference, not that such a result would have been intended, or even possible.
The purpose of the meeting was spin. The intention was for the finance ministers to co-operate in appearing statesmanlike and in control, ahead of the meeting in two weeks at which their leaders will do the same.
In that limited aim, the meeting was a success. This is not totally meaningless: confidence in our political leadership is definitely a key ingredient to economic recovery, and seeing each of them emerge from high-level talks in a magnificent English hotel and conduct reassuring doorstop press conferences and pose for a group photo was, well, reassuring.
The so-called battle between the US and Europe over fiscal expansion is a furphy: does the US seriously think it can borrow much more money from China?
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There was no sophisticated analysis of the causes of the crisis, no realistic assessment of what can be done to fix it, and certainly no agreement about specific actions, beyond stating blandly that there is “resolve”.
The fact is that governments are primarily responsible for this crisis, and there is no reason to think they can solve it.
The super-abundance of liquidity that resulted in a structural decline in saving, as well as housing and equity bubbles, was caused by loose monetary policy, irresponsible fiscal deficits, the recycling of Chinese trade surpluses into US treasury bonds and weak banking regulation. It was not caused by bankers — they were the symptom, not the cause.
Some of those assembling in West Sussex were part of this, such as Gordon Brown, and some were elected in the past 18 months.
But the disastrous monetary and fiscal policies of the past decade are now being aggravated by chaotic mishandling of their consequences.
The G20 agreed to take “all necessary actions to ensure the soundness of systemically important institutions”, without saying what, and they agreed to take “decisive, coordinated and comprehensive action to boost demand and jobs”, without saying how.
The unfortunate truth is that few governments are able to do much more than they have already. Very few have the capacity to borrow any more to finance larger fiscal deficits, and even fewer can reduce interest rates much further.
The UK is now monetising its deficit (printing money). The US says it is going to, but hasn’t had to yet because China is still buying treasuries (while now worrying aloud about it).
One of the key problems with globalism, pointedly ignored by the G20, is the strain on the European Union. Spain, Ireland, Portugal, Austria and Greece are in an appalling mess, but they can’t reflate their economies because they all outsourced monetary policy to the European Central Bank — unlike the UK.
But the ECB remains intent on “anchoring” inflation expectations, which means the basket cases of Europe are in a terrible spot. And Germany is refusing to provide further fiscal support for its own economy, let alone anyone else’s.
Basically, the G20 meeting left Spain, Ireland, Portugal, Greece and Austria to their fates, along with Eastern Europe and the Asian nations dealing with catastrophic declines in exports and industrial production.