“Round up the usual suspects” is that immortal line from the wonderful movie, Casablanca. It is also a convenient rule of thumb in assessing blame for the continuing uncertainty in global markets.
Greece, Italy, Portugal, Spain, Ireland and Belgium are blamed as the usual suspects for the nervy markets; that’s not unfair because they are all spendthrifts and don’t want to pay the bill now that it is due and there’s no more easy money.
But don’t put all the blame on them, there are eight other countries that need to be lumped in with that lot of losers. Conveniently the eight are meeting in northern France tomorrow and Friday in the one spot that will make it easy to identify them.
They are the co-called G8 economies, the so-called leaders of the world and the global economy, to whit, France, Germany, Italy, Japan, the UK, the US, Canada and Russia.
The leaders of the eight countries meet on Thursday and Friday, or rather, the leaders of the world’s biggest and most debt-ridden economies meet to talk about a lot of issues with no understanding and blind ignorance of the damage their policies continue to do to the rest of the globe.
In many respects they are the destabilisers, thanks to poor policies that not only gave us the GFC , but also the weak markets and recovery.
Spendthrifts all (except Canada), debt ridden, with huge budget deficits, dodgy banks and in the US and UK, home to the banking and financial systems that incubated the GFC and continue to stress markets.
All but Canada are basket cases for varying reasons, and the most culpable for the world’s current woes, not the broken minnows of Europe (except Spain, which is a trillion dollar economy).
The US, Japan, UK, Italy, Germany, France are all high-deficit, high-debt countries.
Germany is solid, but is the country most to blame for the woes of the eurozone because it has failed to provide the leadership necessary to resolve the area’s problems once and for all. Germany still has a weak banking system, even if the economy has rebounded strongly, the political leadership hasn’t. The country is the only one that can steady the eurozone, but Chancellor Angela Merkel won’t show the leadership to do that, so worried is the former East German by the toughness of the decisions required and the political unpopularity that might follow.
France has political problems, a weak economy and hasn’t run a budget surplus for 20 years. Russia is run like an oligopolistic dictatorship; Italy is run by a Prime Minister who prefers bunga bunga parties to cutting debt and spending. It is the rarest of countries, lumped in with the PIIGS that are threatening Europe, and pretending to be a leader of the world through its membership of the G8.
Japan simply has too high a deficit, too much debt (even if it all is domestic) and a political and business leadership that is too close and too timid to make the tough choices to change the country’s steady course towards financial impotence.
The UK is there under pretence, past glories and politically ambitious politicians have kept it at this top table of the world’s big countries, while its economy, debt, deficit and spending cuts will condemn it to years of America-like economic performance.
But the one that stands tallest of all in the blame stakes is the US, where President Obama continues to refuse to do anything adventurous about spending and the size of the debt mountain that would send a positive signal to the rest of the world.
So the US economy lumbers along in low gear, dragged down by stubbornly high unemployment, weak savings, falling house prices and a constriction sector still deeply depressed. The country’s trade balance continues to be in deficit, companies and banks in particular won’t pull their weight in spending and generating jobs and banks and financial groups are back playing the same sort of games that bred the GFC.
All financed by a US Federal Reserve’s expansionist monetary policies that has failed to ignite a surging recovery, and at best can be said to have kept the US out of another recession. But in doing so the Fed’s easy money has underwritten worldwide speculation and game playing in the markets by banks and other investors (large and small) and financed some of the inflationary pressures building in many economies.
So do you think the real issues will be discussed and decided on at the G8 summit in the French gambling resort of Deauville? Debt reduction for the US, Japan and the eurozone? Co-ordinated economic policies? A commitment to freeing up world trade? Nah, they would have more luck putting the national debt on red at the roulette table than getting an agreement from the US to admit that its policies are a hindrance to global recovery, that Japan is weakly led, that France is beyond its depth, that Germany is afraid to lead, that the UK is reliving the past, again and has no influence.
Instead global warming, the Arab uprisings, Iran, the IMF leadership and other subsidiary issues will be discussed and a nicely written final communiqué issued that has probably already been drafted. And it will all be meaningless.
And finally, there is one over-arching reason why the G8 is weak and poorly placed to provide leadership to the rest of the world: it excludes China, the economy the rest seek to blame for their woes and underperformance.
Instead of inviting China into the club and admitting that it is a world power, economy and politically, the G8 leaders exclude the one economy that has done more to support the rest of the world since the GFC broke and now gets blamed for that and subjected to all sorts of idiotic commentary, from the small-minded “China’s boom will end and ruin us mob” in the Australian media and opposition, to the right-wingers in the Republican Party and their fellow travellers in the Democrats, who blame China for every problem encountered by the US economy.
So the G8 mob will try to get a deal done that guarantees continued European leadership of the International Monetary Fund, when the previous European (Strauss-Khan) failed to provide leadership. This will be the worst of all outcomes from this meeting of debtor countries that masquerade as the G8 (excluding Canada).