Q&A G20 Summit
Question: On the 11th & 12th November, 2010 a summit of Group of 20 was held in Seoul, capital of South Korea under the caption of ‘Combined Growth in the aftermath of the Crisis’. The main items on the agenda were currency conversion rates and the trade imbalance.
Inauguration of the summit was preceded by statements from Europe, especially France, in an attempt to introduce the issue of altering the present international financial system. This accompanied a bit of a confrontation between the US and China over the Yuan…and over the US pumping millions of dollars…So to what extent can Europe and China succeed in reining in American whims in the international financial politics?
Answer: Yes, indeed the summit was preceded and accompanied by European and Chinese resentment over America’s financial arrogance; however the US was able to emerge from the summit unscathed and its financial arrogance intact! To further understand this issue, we herewith present the relevant events:
1: The Reuters reported on 12th November, 2010 quoting sources in the German delegation to the G-20 summit saying: “The German Chancellor Angela Merkel has conveyed her apprehensions about the US Federal Reserve’s Board of Governors’ recent moves to pump in liquidity in the US economy. But the US President Obama told Merkel during his meeting on the sidelines of the G-20 summit that he would like to see more of local demand in Germany”. From this it becomes apparent that Germany is uneasy about the American policy of pumping money because that will affect the dollar price which be reduced as result of it and will in turn cause hardship to the Euro countries since the Euro prices will increase against the dollar. This increase in Euro prices against the dollar would mean that European products will become more expensive causing trading and financial losses to them.
Obama’s response suggests that he is not only unconcerned about Merkel’s complaint; rather he attacked Germany and pointed to its own weak local demand in the German markets which affects US exports to Germany and the European Union because of lower consumption which is due to scarce money available with people who are fearful about the global financial situation and hence not prepared to spend money, rather they are inclined to save. This is clearly evident in the local German markets. This is why Obama responded by charging that Germany itself is to blame! Reuters has added in its story that: “America had overlooked the criticism yesterday, (11th November, 2010) and that Obama said that he expects the G-20 summit to set ways and means to achieve a wide-ranging and balanced global economic growth. He further said that the rest of the G-20 is aware that US growth is important for the global economy”.This reflects that the US has demonstrated its arrogant and conceited economic policy and it does not care about the world or its people whose majority is suffering from poverty, starvation and deprivation, whose economic development is not important to the US, but it is only concerned with its own economic growth and of the satisfaction of its own people. This is like saying that as long America and its people are well, so is the world at large!
2: The Chinese tried to attack the US by criticising its policy of pumping in money and expressed their utmost concern, as their official said. Zhang Tao, the international department director of the People’s Bank of China told journalists on the sidelines of the summit: “The countries which enjoy huge reserves must consider the global repercussions of their policy”. He warned saying: “Unorganised capital inflows as a result of the US Federal Reserve Bank’s Board of Governors’ moves may harm the rising economy and spell danger for global economic recovery”. [Reuters: 12th November, 2010]. However the US officials attacked the Chinese over the policy of their Yuan and charged them of keeping their currency low which results in trade imbalances, they tried to demonstrate that it was not US’s problem but of the Chinese themselves.
3: The concluding communiqué came as a victory for them, it did not criticise the US nor did it
powerball numbers blame America for the global economic downturn and thus it cleared the US of the allegations and pressures and the global economic order remained very much that it was, as well as that the US retained the reins. Even a senior American official requesting anonymity said just hours before the conclusion of the summit: “The discussions were very encouraging”. And he said: “The final communiqué which is expected to be issued at the summit will somewhat shrink the pressure and tensions which we witnessed and will also frustrate the expectations of those who forecast that the summit will end up in disarray”. He also said that the final communiqué will be very similar to the statement adopted by the finance ministers in October in South Korea. [AFP 12th November, 2010]. i.e., the US was in a position to prepare the draft statement on the lines of its liking and which will not blame America for the continued global financial crisis. It will be for each country to shoulder the responsibility. And this is what was noticed in the final communiqué.
Thus the final communiqué did not contain anything new nor did it propose any solutions, what it did contain were general notions, for instance: “The developed economies will provide protection from exchange rate fluctuations, which will help reduce the danger of major upheavals in pumping money which is being faced by some developing economies”. This expression is in US’s favour which is pumping hundreds of billions of dollars in the markets. This is like saying that the American economy, being a developed one is in a position to provide protection against upheavals in the exchange rate fluctuations, and this will help reduce the dangers of major upheavals resulting from pumping in money in the markets which is a policy that it is pursuing since the emergence of the crisis in 2008 when it printed and pushed trillions of dollars in the markets.
The communiqué said: “The steps to be taken will include a number of guidelines will help at appropriate times in controlling the imbalances that require taking correct and protective steps”. The statement also said: “The ministers will work with the International Monetary Fund to take into account the guidelines that are discussed are taken during the first half of the next year”.
Criticisms came during the preparation of the statement that “the group i.e. the G-20 did not define these guidelines either in content or in their extent, that is to say that it did not elaborate the guidelines sufficiently”.
4: It appears from these that the summit did not change anything in the global financial system as was being demanded by some especially France, nor did it positively respond to the demands of those who are dissatisfied with the US actions and were not in a position to dissuade America from its policy, nor could they condemn it or even influence public opinion against the authoritarian economic policy which has taken arrogant proportions as was the case during the tern of President Bush Jr. But now that arrogance in economic and monetary policies is even more conspicuous. If the printed financial instruments are not even worth the green ink and with which the treasury bonds are bought and which are already showing signs of slowdown, and if with such instruments, it is trying to demonstrate that its indebtedness has been reduced and its markets have become active and it is using these worthless greenbacks backed by nothing more than ‘In God we trust’ to purchase the riches of the world, then no one has the right to put the blame on the US, since only the US has right to do so!
We can also see how the Europeans have shackled themselves and are not in a position to print their own currency beyond a certain limit, while the US can protect itself from criticisms and even attacks owing to its policy of pumping in money into its economy. This shows that America is determined to protect itself from criticisms and prevent the summit from issuing a statement critical of its policies, and thus preventing the formation of international public opinion against its monetary and fiscal policies which actually are behind the global crises. It also indicates that the claims of changing the world economic order have been failed while the world continues to remain under the previous Bretton Woods regime since 1944, which means that the dollar remains as the principal international currency, the IMF continues to play the same role, the US retains the right to print as many dollar as it pleases and all this without any hindrance.
In this way the United States is able to retain its overwhelming international position and authority and continues to call the shots with its grip on the reins of the world!
5: As for the other participants in the summit, China was able to offset pressures to quickly strengthen its currency but agreed to do so in a phased manner. The real losers were the Europeans who failed to force any changes in the global monetary regime as they had aimed. They also failed to condemn the US for its policy of pumping money in the economy and of keeping its currency rate low and they could not form public opinion against this. Hence it is unlikely that Sarkozy, who is urging for bringing about changes in the global monetary policy, will have anything worthwhile to remember during his one year tenure as president of the summit which he received during this meeting. So the guidelines, which the summit asked for would take six months of preparations and involve discussions between the finance & trade ministers with the IMF as pointed out in the statement. After this, it will take another unspecified period of time to be implemented. Thus the effectiveness of those guidelines is unknown, perhaps the status quo will continue until the next G-20 summit which will be held in the month of November next year!
8th Dhul Hijaah, 1431 A.H
14th November, 2010 C.E