Wrap up of the G-20 summit

Today was the final day of the G-20 summit meeting in Seoul, South Korea.  The G-20 is the organization that gathers the world’s 20 largest economies together to discuss global economic issues.  Overwhelmingly, nothing of any substance ever gets done.  Effectively these gatherings are kind of like going out to lunch with old work colleagues.  You don’t go to the luncheon so much because you expect anything to happen from the meeting.  But if you ever needed a kind word or a favor you would not have wanted to have burned the bridge.  And so it is with the G-20, too.

So what happened this time?  Next to nothing.

The United States entered the meetings trying to bring pressure on China, Japan and Germany to begin to transform their economies from almost entirely export based, to more consumption/import based.  This did not occur.

Another goal for the United States was to try and coordinate global trading policies.  Instead of anything substantive happening the G-20 agreed to think about these issues before the next meeting takes place and to revisit the possibility of doing something in June of next year.

These meetings are usually dominated by the United States because it is the global hegemon.  Therefore what the U.S. delegation says usually has tremendous import.  Yet, Barack Obama has emerged from this summit with not much to show for his efforts.  But the U.S. has still emerged somewhat more powerfully; it’s just that Barack Obama is not the cause.  Instead, the U.S. Federal Reserve’s announcement of its Quantitative Easing (QE) has very effectively communicated to other nations that the U.S. is prepared to “not take it anymore.”  That means that the U.S. is signalling that it is prepared to fight if there aren’t changes to the way nations trade with one another.

Mitigating against this pressure is that China, the chief concern of the U.S. delegation, has agreed to continue to allow its currency (the Yuan) to appreciate.  Whether they raise the value fast enough for the tastes of the U.S. remains to be seen.  However, in general, Barack Obama has proven to be a president that prefers to “let things ride,” rather than initiating much motive force for his beliefs.

I hope that each of you has an excellent weekend!

Jason