G-20’s Done: Time to Recheck Buy Signals 9 comments
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Bretton Woods 1944 or London 1933? That is the question European leaders will be asked as they face their constituents this week. In other words, does the G-20’s six-point plan represent any fundamental change in the global financial outlook or is the two-part G-20 document issued on Saturday simply a collection of non-committal ideas?
The Bretton Woods summit (1944) did succeed in producing the architecture for the rebuilding of Europe and for the modern-day financial environment. The London Conference (1933) of Allied nations, on the other hand, failed to stem the widespread negativity of the Great Depression and, according to one school of European historians, strengthened fascism in Europe, and created political and economic havoc in former Ottoman dominions and in dozens of far-flung British and European colonies; six years later the Second World War broke out.
Two days prior to the Washington gathering, French Finance Minister Christine Lagarde said that “we see friction between Anglo Saxon capitalism on one hand and European capitalism on the other.” Given the huge bailout schemes on both sides of the Atlantic, it is difficult to figure out who exactly is a genuine capitalist today, despite President Bush’s proclamation that the free market principles must not be compromised.
But, in any event, the question of whether Washington 2008 will resemble New Hampshire 1944 or London 1933 is going to be answered by the fate of the developing world economies through the course of 2009; as far as the G7 nations are concerned, one can safely assume that the stimulus-after-stimulus process is ushering in a new era of state capitalism whose longer term shape is highly unpredictable.
It is the emerging market fund managers and investors who now need to recheck their buy signals, keeping 1933 clearly in focus. Because the first visible signs on the horizon reiterate a sell-on-rallies call, a stay-out recommendation and a get-out alert.
Powerful voices from Latin America, Africa and Asia today are pointing to the fact that the G-20 summit largely ignored the one key challenge which is threatening third-world economies with severe contraction, in real terms, regardless of GDP data: increasing levels of poverty, and a steady deterioration in living standards amongst the middle classes who contributed so significantly to the growth in consumer demand in recent years. In fact, emerging market political leaders continue to worry about currency devaluations, capital flight, declining foreign investments, shrinking exports and domestic interest rates, none of which are going to effectively counter political movements rooted in urban and rural discontent, and in sheer frustration at five decades of plans, schemes and programmes promising better tomorrows.
This is not the forum to engage in a country-by-country analysis of the political formations (military and civilian dictatorships, political Islam and ineffective coalitions) which dominate the emerging market spectrum today. At this juncture, it is evident from the facts on the ground that those granted favoured-nation status in Washington (i.e. Brazil, India, China, Russia, Indonesia, Argentina, Mexico, South Africa, Russia, Turkey, Saudi Arabia and South Korea) are not in need of any monetary actions which prop up banks and industry; what they need deep within their economies are thorough structural changes: land reforms, rural-debt elimination, higher crop yields, revamped food distribution channels, efficient tax-collection drives, diminished underground (black) money pools and, most importantly, anti-corruption measures.
Mutual fund managers insist that, despite the bearish tone of the persuasive general evidence, junior exchanges continue to offer selective, above-average investment windows. In that event, let them disclose the full extent of currency risk and political risk (as distinct from default risk) in their portfolios today.
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This article has 9 comments:
What the communique did, after only a five-hour meeting of about thirty delegations, was embed each little, separate slogan or issue in the jello, but only as words, slogans and issues, without commitment or expectation . For example, the communique promises that "we will use fiscal measures to stimulate domestic demand," and then adds "as appropriate." It doesn't say what "colleges of regulators" are, or what powers they will have, if any, but calls on major global banks to meet them for "comprehensive discussions."
Typical are such ringing, inspirational declarations as this one: "Authorities should insure that financial institutions maintain adequate capital in amounts necessary to sustain confidence."
This is all bullshit. There's no seriousness in this piece of disgusting incompetence. They're going to have a great deal of trouble trying to prevent a runaway crash Monday and Tuesday. Because, this bullshit can go on, but it's not something you can sell. They probably will pump up the greatest bloating of the market they ever did. Expect that from them.
The one thing the statement did that was useful, was to pin the crisis on George W. Bush, saying that its "root causes" occurred "earlier this decade," that is, under his Administration - the greatest collapse in history has occurred under George Bush's Administration. This event is the George Bush burial society. It nominates George Bush as the worst President in history, excepting the outright traitors. The collapse is the fruit of a Bush-league President. The idea of this son-of-a-bitch getting encomiums and going out, is disgusting.
This is a farce, and it's intended to be a farce. Nothing significant was going to be decided. There will be innuendo and attempts to corrupt the situation as much as possible, especially by the British side. And the British side, as usual, is looking for handouts from everybody else. They want a bail-out.
The British always set these things up: You've got to debate this; you've got to debate that.' It's all bullshit. The British deployment policy is: make sure that nothing works.
I think we ought to express unbridled contempt for such a farce.
Iin the run-up to the Nov. 15 summit of the G-20
* British Prime Minister Gordon Brown told journalists on his flight from London to the U.S., that he expects the summit to support a sharply increased role for the IMF* in global surveillance, a return to the long-stalled Doha round of world free trade talks, and the establishment of a supranational "college of supervisors" to oversee all banks internationally. Brown is scurrying around to impose this agenda, meeting before the summit with Russian President Medvedev, Japanese Prime Minister Aso, and Brazilian President Lula, as well as with Nobel economists Joseph Stiglitz and Paul Krugman. Most significantly, Brown's financial and foreign policy advisers will hold talks with Obama's envoys to the conference, Madeleine Albright and Jim Leach.
* Japanese Prime Minister Aso will call for doubling the current $340 billion in IMF funds, and will offer $100 billion from Japan. The Saudis may also offer to pony up funds for the IMF.
* German Chancellor Angela Merkel will propose increased transparency and controls "for all kinds of financial products," including derivatives, to be managed through an upgraded IMF.
* Indian Prime Minister Manmohan Singh called for "greater inclusivity in the international financial system [and] the need to ensure that the growth prospects of the developing countries do not suffer," but he stressed "the need to avoid protectionist tendencies." His Finance Minister P. Chidambaram likewise warned that "the crisis should not be an excuse to go into a protectionist cocoon."
* French President Nicolas Sarkozy announced on Thursday that "I am leaving for Washington to explain that the dollar... can no longer claim to be the only currency in the world," while the daily Le Figaro warned that "Sarkozy has already planned to create some incidents during the sessions if the U.S. comes out being completely closed off from the European proposals." Sarkozy has also used his position as rotating president of the EU, to get seats at the summit for Spain and Holland.
* Russian President Dmitri Medvedev stated that the summit will be inconclusive, but that he supports holding "without any extra red tape, and fairly soon," a follow-on summit on the financial system. "We need a full-scale, adequate response to the problems, not simply a collection of declarations, handshakes and photo ops, but rather an action plan." After talking about categories like "transparency," "early-warning procedures," and lowering trade barriers, he included something with more potential: "Elimination the imbalance between the volume of the mass of all kinds of various financial instruments that are issued, and the real returns on investment on the programs they are related to." If that point were truthfully pursued, it would lead to the guts of the crisis: the derivatives bubble.
*IMF = International Mother F*ckers
The seeds of failures were planted by Jimmy Carter.
And later fertilzed by Bill Clinton.
Same story with automakers.
Fannie/Freddie reform was proposed in 2003/4, by the appropriate house committee, except that the REPUBLICAN members shot down bringing the proposal to the floor.
Clinton left office with moderate taxes, and a $120 billion surplus
The only fascists I'm worried about over the last eight years were the republicans in Washington.
I voted for Reagan, for Bush 1 for a second term. The current group of republicans are spineless, disingenuous, and counterproductive for our country. They have destroyed America.
Good luck to the new leadership.