The illusion of the G20
January 29th, 2010
It seems clear that this "prestigious" top twenty grouping (see 27) largest world economies will not address serious global economic dysfunction.
The main problem is probably the disorganization and lack of strict central banks worldwide. It is assumed that the bubbles in financial assets are related to excess liquidity. Surplus created by two phenomena: low rates of Western central banks for more than a decade even in phases of strong growth, but excessive accumulation of foreign reserves of exporting countries.
These two destructive phenomena were not even mentioned by the various Heads of State (China has only tentatively sketched the idea of questioning potential instead of the dollar in the global economy.).
Indeed,
the United States, the United Kingdom or Spain for example (highly deficit) are not ready to accept the idea of a monetary policy less accommandante, increasing de facto interest rates on loans . This would prevent households continue borrowing to consume and destroy our growth potential. The model of growth through debt is currently the only growth driver of our country and therefore can not be reversed by our policies under hardly a true destabilization of our society. This consideration would imply an heavy changes and willingness to consider lower salaries (deflated by inflation and changes in asset prices), the distribution of income (wages profits) on the renewal our economic models, to propose new paradigms ...
On the other hand, exporting countries (of raw materials or manufactured goods) by definition have based their growth on the trade surplus. It is therefore vital for these states Commell China, for example, to keep rates relatively low to the dollar to maintain their price competitiveness. ... Unfortunately, when the Chinese central bank buys dollars (in the form of treasury bills) to maintain artificially the price of the currency, and when it does "not sterilize these purchases, it creates de facto the additional liquidity in circulation. Again, for countries like China are willing to let 'vary' their currency and avoid creating money, it would be necessary for domestic consumption to come take over from exports. It would then be dissaving households in China to more quickly develop a system of social security and retirement, adjust equipment production to products for the local population ... At the moment these countries are not ready to quickly rethink their model growth to break the world's macroeconomic imbalances.
By focusing on Bonus traders (albeit scandalous and immoral), the G20 does not seek to address the root cause of the financial crisis but simply wants to focus on subjects appealing to fashion to appease the anger of people. It saves time and it moves the problem! When will this debate to a cooperation of central banks to avoid plunging into a crisis next ... probably more destructive when a genuine rethinking of the functioning of the foreign exchange market ...
Tags: Bonus traders, of exporting, of Western central banks, The foreign exchange market