President of the Council and Commission, Herman Van Rompuy and Manuel Durao Barroso, expressed their satisfaction over the outcome of the G20 Seoul Summit held between 11 and 12 November 2010. The EU wanted this summit to make progress on joint action to boost global growth and jobs and therefore welcomes that the Seoul Action plan commits the G20 further to global action for balanced growth. The Action Plan agreed in Seoul G20 Summit is a clear recognition of the joint responsibility held by all countries. All major economies have agreed to do their part to achieve rebalancing to tackle imbalances and will strengthen the mutual assessment process to promote external sustainability. Barroso and Van Rompuy expressed their satisfaction on the fact that the EU method to use indicators to trigger an assessment of macro-economic imbalances and their root causes was backed by the G20 leaders, and have committed to bring the experiences gathered from the process of adopting a robust mechanism to address macro-economic imbalances which is currently into place. – Euroalert
Dominant Social Theme: OK, it all worked out.
Free-Market Analysis: The G20 Summit has come and gone. Herman Van Rompuy may be satisfied with its outcome but the chances are that many involved in the Western power elite nexus will not be. There was evidently and obviously pressure put on China to cooperate more effectively with the West on monetary issues, and so far China seems to be resisting. In fact the G20 as an aggregate, and especially the BRIC nations, seem fairly unresponsive to Anglo-American pressure at this date.
In the run-up to the conference it was becoming obvious that there would not be full agreement regarding what the United States hoped to accomplish. The common wisdom holds that the US is concerned with an undervalued yuan, which allows the Chinese to sell easily into American markets. But we have wondered if it is the vast quantity of securities that China has accumulated as a result of its policies that is bothering the West. The growing power of the Chinese, via its accumulation of gold and dollars is likely becoming a drag on any contemplated dollar policy.
The US, for instance, wants to print money, but still has no assurances that other countries will not debase their currencies as well. And while our perspective on these global sideshows is that they have been created to rubber-stamp the policies that the Anglo-American elite supposedly wants put in place, we can see from this most recent G20 meeting that stated Western objectives have not been entirely accepted by any means. On the other hand, we have noted that Western interests are taking a higher profile in China; the Rothschild banking dynasty itself recently received a high-profile banking charter; a large Chinese auto facility is apparently taking a significant position in GM.
It is hard to tell, currently, the significance of these moves. One thing seems certain: Insofar as the G20 is concerned, the Anglo-American elites are not having their way. We have written on several occasions this past week that we would wait to try to figure out what this might mean; and there could be several different meanings actually. But on its surface, it remains a rejection of US policy, as we can see restated in this AP story:
G-20 refuses to back US push on China's currency ... Leaders of 20 major economies on Friday refused to back a U.S. push to make China boost its currency's value, keeping alive a dispute that raises fears of a global trade war amid criticism that cheap Chinese exports are costing American jobs.
A joint statement issued by the leaders including President Barack Obama and China's Hu Jintao tried to recreate the unity that was evident when the Group of 20 rich and developing nations held its first summit two years ago during the global financial meltdown. But deep divisions, especially over the U.S.-China currency dispute, left G-20 officials negotiating all night to draft a watered-down statement for the leaders to endorse ...
The G-20's failure to adopt the U.S. stand has underlined Washington's reduced influence on the international stage, especially on economic matters. In another setback, Obama also failed to conclude a free trade agreement this week with South Korea. The biggest disappointment for the United States was the pledge by the leaders to refrain from "competitive devaluation" of currencies. Such a statement is of little consequence since countries usually only devalue their currencies – making it less worth against the dollar – in extreme situations like a severe financial crisis.
The statement decided against using a slightly different wording favored by the U.S. – "competitive undervaluation," which would have shown the G-20 taking a stronger stance on China's currency policy. The crux of the dispute is Washington's allegations that Beijing is artificially keeping its currency, the yuan, weak to gain a trade advantage. U.S. business lobbies say that a cheaper yuan costs American jobs because production moves to China to take advantage of low labor costs and undervalued currency.
While the outcome of the meeting seems clear, there are certainly different ways that it could be interpreted in the alternative, "conspiratorial" media. Accepting that the power elite aims at creating world government, one could argue that a diminishment of US clout brings such an environment closer. One could also argue, as we pointed recently, that failures involving the G20 generate increased nervousness and thus hasten the kind of financial chaos that the Western elites can take advantage of.
Regardless of how the G20 meeting ended up, there is also a case to be made that China is not nearly so powerful as the Western mainstream media is presenting that country. As we have pointed out, the regime itself is anything but universally popular. (What authoritarian regime is?) It is also representative of the Han, China's largest ethnicity and thus there are certain ethnic and racial overtones to the regime's actions.
Even laying aside the grievances that the Chinese may have with their government, there are other reasons to believe that the China's rulers are anything but secure. We have pointed out for over a year – long before most observers began to criticize China's overheated economy – how delicate the economy was generally. Price inflation in our view is almost out of control, and the sprawling system itself is a mimic of capitalism, not a reality. As authoritarian as the West has become, it is nothing compared to China: A kind of Potemkin village of capitalism where nothing is as it seems.
To the outside observer, China appears to be an increasingly competitive place. But our argument is that like many authoritarian states, marketplace competition is reserved for the small vendor selling cell phones or sunglasses out of shops, kiosks or on the street. Meanwhile, the financial system only appears to be contentious. In fact, the major players all report to the communist party to receive their orders.
Given that the system is based on a pretense of private enterprise rather than its reality, we would not be surprised to find if there are many statistics regarding the economy that are inaccurate. While there has not been much reporting in this area, some indices are finally beginning to be challenged. It is not the Western media that is bringing these contradictions to the fore, but the Chinese, as follows via a Reuters report:
Inflation "under-statement" sparks row in China ... With price pressures on the rise in China, a rare public spat has broken out in government circles about whether the statistics agency is suppressing the full truth of how high inflation really is. Many Chinese have long harboured suspicions about the quality of official inflation data, saying that it does not adequately capture soaring property prices or food costs. But criticism took a curious turn this week when the Chinese Academy of Social Sciences, a top government think-tank in Beijing, published a research article arguing that the consumer price index had been under- stated by more than 7 percent over the past five years.
Somewhat surprisingly, gold, silver and platinum all dropped yesterday on concerns, apparently, that China was going to raise rates. We have anticipated a pullback in precious metals, given the near verticality of prices recently (and what seemed like a kind of mini-promotion to drive prices up prior to a pullback), but the idea that China can move bullion prices is somewhat new to us. This brings us to our final point, which is a question of the convergence of Chinese and Western elites.
We have mentioned previously that some powerful Chinese families may self-indentify asJewish. The "Li" family in China is commonly held to be the most powerful, with the Lis (or Lees) also seen as controlling Hong Kong and prominent in Korea and perhaps even Singapore. There are questions as to whether these disparate familial groups are linked or not and even how much clout the Li family exercises within China. The Lis are said to operate within the communist party as well as outside of it and were also close to Mao.
But the larger point we would make here is there are likely competing power centers in China (army versus party, etc.) and the society itself is may not be nearly so historically congruent or long-lived Western ones. This is ironic since the Chinese civilization is far more ancient than its Western counterpart. While China may have its elites, the country's convulsive history over the past 200 years may have prevented a single dynastic family from emerging with ultimate power (though it is speculated within the alternative press that the Lis would come closest to fulfilling this profile.)
If there is not a series of dynastic families that allow for the convergence of Western money power, then the current contretemps within the G20 becomes even more meaningful. The differences of opinion are not after all a production for public consumption but an actual altercation that has not been resolved. This would indicate to us that Western powers-that-be have hastily (they do seem to be in a tremendous hurry these days) pulled their own house down upon their collective head without, perhaps, creating alternatives.
Many observers of the power elite scene believe that money power is fungible and it is evidently flowing East. But we are not so sure that Western elites can find a home in China as some. There is a difference between aiming one's manipulations at a third-world country and Europe or America in our view. Also so long as the depredations were restricted to Africa or South America, the elite Western elites were somewhat insulated from "blowback." But that hardly seems the case now.
What the G20 summit is showing us is a continuation of a trend. The Anglo-American axis was evidently not able to impose its will on the rest of the world. One can go round in circles trying to figure out if this is part of some sort of larger, Machiavellian strategy. But let us take it at face value for the moment. Right now any moves to solidify the IMF's control over the global economy via a more formalized role as a central bank does not seem entirely realistic. Currently, the Western elite's apparent goal of taking over the world's economies via the mechanisms of Bretton Woods seems to be less realizable, not more.
This is in line with other difficulties the Western power elite seems to be having. The truth-telling of the Internet itself has begun to invalidate many elite memes, from global warming to central banking to the "war on terror." Among other impacts, we tend to believe that the powers-that-be have speeded up their plans to consolidate world governance as a result. There may be other reasons (it is impossible for us to say) but this seems like an adequate, or at least reasonable, speculation. Is Western money power somehow seen as less formidable these days within the larger context of what is occurring?
These are fundamental questions for anyone trying to figure out where the global economy is headed and how it will get there. The ramifications are tremendous. After World War II, the Anglo-American axis had the clout to impose a kind of Pax Americana on the globe's bleeding nations. The US alone controlled something like 50 percent of the international productive capacity. But that was then. Today both America and Britain are far weaker, hollowed out by their own elites in what may prove to be a miscalculation.
If this same elite cannot re-impose its will on the world, then surely entropy will begin creep in as nature abhors a vacuum. The result could be, in our opinion some sort of gold standard, but one that is implemented by default, as powerful nations seek their own serial solutions. Perhaps it will be, even, a market-driven gold-and-silver standard alongside a free-banking regime.
Like you, dear reader, we are reading the tea leaves and following along as best we can. The G20 seems to be confirming our perspective that a formal, international realignment of control giving rise to additional institutions controlled by the Western elite is not going to happen easily or quickly, if at all. We return to a previous question, then: How does one build an "new world order" without fully dominating the world? And if one is willing to give up control for this goal, then the power-sharing itself invalidates the result. Either someone "rules the world" ... or not. A consortium would seem to be a contradiction-in-terms.
There are perhaps potential solutions: a new world war, a massive false flag event that would jolt the world into a new crisis mode and demand solutions that only the Western elite is in the position to provide. And yet even these seem to us not to address the fundamental problem of Western weakness in the face of a new century and a new communications technology that is undermining the secrecy of money power.
Conclusion: We continue to closely monitor this unfolding saga (the most important in the world in our view) in the hopes of divining more clues. But right now the reality of global governance and a new, international currency regime might be seen as receding not approaching. This is the lesson we tentatively take away from this latest G20 meeting, the most important one so far in our humble view. We could be wrong.
______________-
By Simon Johnson
It is hard to imagine how the summit could have gone any worse for the US Treasury and the president. The spin machine is now working overtime – and you’ll see big efforts to get more positive stories over the coming week – but on all fronts the outcome is very bad.
- There was no substantive progress on anything to do with exchange rates. The “indicative guidelines” to be agreed next year are just a way to kick the can down the road. The Chinese are digging in hard on their exchange rate; this is headed towards a mutually destructive trade war.
- There was less disagreement at the summit regarding the ”regulation” of global megabanks – but only because this had been gutted so effectively by the bankers’ lobby and officials who bought their specious arguments. There is nothing here that will prevent or limit the impact of another major worldwide financial crisis.
- On IMF governance, over which there was substantial fanfare in advance, it turns out there has been a major step backwards. The Europeans have apparently signaled they are no longer willing to give up the job of Managing Director – they have always controlled this job and this is a major reason why IMF legitimacy remains weak. Unless and until an emerging market person gets this position, no one (outside of Europe) will want to rely on the IMF in an emergency. As a result all countries will want to “manage” their exchange rates – to the extent they can – along Chinese lines, aiming for a significant current account surplus (so as to build up foreign exchange reserves). See point #1 above for the likely consequences of that.
