The 20 largest economies in the world are due to meet in Pittsburgh, Pa., this Thursday. This group is expected to address issues like climate change, financial regulatory reform, trade and exit strategies from the governments’ stimulus packages.
Sunday, President Obama spoke about what he wants the G-20 to do.
“President Barack Obama said Sunday he would push world leaders this week for a reshaping of the global economy in response to the deepest financial crisis in decades,” reported Reuters and CNNMoney.
The article continued, “The United States is proposing a broad new economic framework that it hopes the G-20 will adopt, according to a letter by a top White House adviser.”
The framework essentially indicates that countries should become more economically balanced.
For example, “the United States should save more and cut its budget deficit, China should rely less on exports and Europe should make structural changes – possibly in areas such as labor law – to make itself more attractive to investment.”
Easier said than done, and some say the G-20 isn’t taking any reform plans seriously.
MarketWatch’s Greg Robb reported, “The Group of 20 leaders may strut and preen next week at their summit in Pittsburgh about how they saved the world economy and made sure a crisis never happens again, but many analysts have already turned their backs on the group, convinced no serious reform plans are on the table.”
Garten, the former dean of the Yale University business school and a top international economic adviser to President Bill Clinton, told MarketWatch, “The further away we get from the epicenter of crisis, the less likely the G20 is to coalesce around anything that has any teeth. I think the real danger here is almost nothing done to prevent another financial crisis from coming down the pike.”
In other words, the reform plans on the table are mild at best.
“There is a profound sense that an opportunity to make a big difference has been missed. National politics, entrenched interest groups and inertia have conspired to make meaningful reform unlikely,” wrote Robb.
Without significant reforms or a clear exit strategy to unwind all that stimulus cash that has been pumped into the system, is the global recovery going to have any real chance of growing roots?
Forbes reported, “As the global economy appears headed toward recovery, concerns are growing that the United States’ addiction to massive fiscal stimulus as an economic panacea could eventually lead to an even bigger crisis – a loss of confidence in the U.S. dollar.”
And with that, the U.S. will have an even longer road to recovery.
The Fed says the U.S. is still weak.
“Federal Reserve Chairman Ben S. Bernanke, who studied at both Harvard University and MIT in Cambridge, Massachusetts, said on Sept. 15 the U.S. economy isn’t strong enough to reduce the 9.7 percent unemployment rate quickly,” wrote Laura Cochrane and Anil Varma for Bloomberg.
And as the U.S.’s failed financial system has been blamed for the global economic crisis, any true loss of faith in the U.S. dollar – particularly if it is coupled with a strong rebound in international markets – will lead to another imbalance in the global economy.
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