Thursday, April 2. 2009
G-20 Summit: Merkel and Sarkozy Challenge Obama
Posted by Editors in International Economics on Thursday, April 2. 2009
President Barack Obama had more success with former Cold War combatants than with some European allies as the Group of 20 summit of world leaders began, starting new talks on arms and trade with Russia and China but facing a challenge from France and Germany over economic leadership. Mr. Obama began by conceding U.S. culpability in starting the global financial crisis, but also called on Europe and others to do more to end it, in an opening news conference with the summit host, British Prime Minister Gordon Brown. French President Nicolas Sarkozy and German Chancellor Angela Merkel answered just hours later with a combative appearance of their own, demanding fast and strict international regulation of the world financial system; Mr. Sarkozy called it "nonnegotiable.
They think he can be rolled....
They might be right - but by China, not Germany/France....
Ah, Don, then let's have a look at the numbers. The US exports about € 60 billion to China, it exports about €200 billion to the EU. Now, who has the greater purchasing power?
Ok, the Chinese are supposed to have hoarded € 1,5 trillion worth of Greenbacks. The EZB might perhaps have €100 billion in spare greenback change. Now wait a minute, is it dollars the Chinese store or are they IOU's? IOU's then. Don't you think the same rule as in business applies here? If you are a small creditor to a bank and you get into trouble, you have a problem. If you are a big creditor to a bank and you get into trouble, the bank has a problem.
China has no power in this game, nothing whatsoever. If they stop buying US debt, they cannot sell anything to the US of A. Bang, goes the Communist Party of China. Not going to happen.
Start taking us serious.
We're the one who roll.
Ah, Soli - you fail to realize that weakness in strength in this recession. The US is worried about a rolling collapse like the 1930's, and worried about the return of Adolf Hitler (or something equally destructive). Let's not forget that it was the Depression which destroyed the world order of the 20's and put Hitler into power, which ultimately caused WWII.
So which country is the US most worried about? Not Germany or anyone in Europe, they aren't going to elect a Hitler, or if they do that leader won't be powerful enough to knock the dominoes over. No, the worry is China.
Not the current government, but the government that might emerge if things get truly desperate there.
World trade is collapsing at a rate never before seen, not even during the 30's. Holland's CPB Institute says global trade shrank 41 per cent (annualised) from November to January.
Industrial output has fallen heavily over the last year: by 31 per cent in Japan, 24 per cent in Spain, 19 per cent in Germany, 17 per cent in Brazil, 13 per cent in Russia and by 11 per cent in the UK and US.
Purchasing power isn't all that important; it follows the econmic tides. Demand is important, the crisis is rooted in a failure of demand, a shortage as you would. A country which produces far more than it consumes is no longer strong - it is weaker than it thinks it is.
And the policies being pursued in Continental Europe assume that the crisis will end soon - in 2009 or 2010. If it does not, if global deflation is not averted this year, trade will continue it's rapid collapse, and countries heavily dependent upon exports and trade (Germany, Holland, China, Japan) will be in deep crisis. They will be the biggest losers from the collapse of world even though they don't realize it now.
With Germany leading the opposition to the attempted reflation of world economies, Obama and the US will be tempted to try saving a smaller bloc of the world, a 'coalition of the willing', based upon but perhaps not limited to NAFTA, as the international system continues to break down. It's happened before during the 30's - it can happen again.
Don,
China's current leadership is at times hostile to the West, but they are far more measured in their rhetoric than is Russia. For China to suffer the sort of dramatic collapse you are talking about, the current leadership would have to be replaced in some sort of mass uprising or coup.
I suppose anything could happen, but based on how things look today, I am more worried about a Russian collapse (or a Russian act of aggression born out of despair) than a Chinese collapse. Aren't you?
I have several reasons why China should be a larger concern, John.
1) Smaller risk (perhaps), but larger consequences. The West doesn't know much about inland China, the huge polluted industrial cities of the interior. We do know that China is as dependent upon export markets as an economic driver as any country on earth, and exports (and world trade) are plunging.
2) China's leadership is concerned, and have been for many years. They believe China must keep a very high rate of growth, 8%, to absorb workers. That may not actually be true, but I'm inclined to think they know more about the situation than you or I do.....
3) World trade is falling swiftly. Assuming it continues to fall and it stays down, China is going to have a lot of suplus workers and surplus factories. China also has a surplus of men in the younger generation.
One obvious way to employ young males is to expand the army. Equipping a large army can provide work for shuttered factories and unemployed workers, as Germany did during the 30's.
Given the experience of the 30's, I'd say trying to avoid repeating that outcome is worth a little effort, wouldn't you?
Many of the same things could be said about Russia, of course, except that Russia isn't an exporter like China, and doesn't have near the potential as a military power that China has. Russia was barely able to keep it's army moving in the field during the Georgian War, even against an unimpressive foe.
I agree, China is vitally dependent on exports and growth, which in turn depend on world trade, which is shrinking. And in the long term, they probably do need to sustain something like 8% growth. But the Chinese have currency reserves, so they could presumably fund enough social programs to keep people happy for a while. Their leadership certainly recognizes that the current downturn is temporary. Temporary could mean months, years, or at most a decade, but ultimately, temporary. Thus, China would likely pursue a strategy of waiting it out, rather than throwing out the model that has worked so well for them these past decades.
If the Chinese political system was as weak and disorganized as the Weimar Republic, I might share your concern. But, the current Chinese system is neither weak (as far as we know), disorganized, nor is it particularly democratic. Thus it is unlikely a charismatic leader could sweep into power.
So, China giving up on peaceful economic growth and gearing up for total war seems unlikely. I suppose it is possible the current leadership could engage in some modest adventurism as a distraction, while pursuing an overall strategy of waiting it out. But they are still a ways away from having the navy or air forced required to threaten Japan, Taiwan, etc. Indeed, the most likely target for this adventure would be Russia. For example, they could seize some gas fields in Eastern Siberia.
Russia, on the other hand, in spite of the global growth in prosperity, has been in a steady, multi-decade decline in many areas -- population, lifespan, living standards, for example. These declines are likely to continue, even when (if?) the global trade decline reverses. Russia's economy has kept up only because of lots of gas and some oil; but that sector will be hit by the global recession. Also, Russia didn't make necessary investments in the current decade to sustain production in the next decade. Under today's conditions, it will be even harder to do so. It will likely require further "selling out" to foreign companies, which would be another major blow to the Russian psyche.
I am not predicting a Russian collapse, but I do think that such a collapse is far more likely than a Chinese collapse.
Of course, if the decrease in global trade caused a catastrophic collapse of the dollar, that would hurt China more than other countries. If that happened, or if the current US Treasury Bill (T-Bill) bubble were to collapse, all bets are off...
what I read is that China became the winner of the G20, she's got the money reserve to buy any enterprise in the world wide, of course her interest is that the consumerism carries on, though we should focus, as a single state, to product our own goods and buy local.
Come to think of it...I suppose China could go for an adventure on the Korean peninsula. Suppose N. Korea collapses (on its own or with push from China), Chinese relief workers and peacekeepers could drive right up to the DMZ. But if the US looks weak, they could think to themselves, why should we stop at the DMZ? Hmmm...have to think about that one....
If North Korea collapses, the Chinese will have their hands full just trying to maintain some order amoung the millions of North Korean refugees that will flood into China. And there are several thousand US troops just south of the DMZ. Nothing in South Korea, including South Korea itself, would be worth China getting into a shooting war with the US. Finally, if China invaded the South, Japan would test a nuclear weapon within a year, if not less.
"What evidences support your conjecture that China may take an adventure in Korean peninsula?"
October 8 - November 1, 1950
Of course, the idea that China might try this a second time, is pure speculation.
Even earlier than 1950 when the Chinese invaded Korea in the 17th Century. I think at the time there were two explanations, either they were invited in by the Koreans or a couple of thousand armed Chinese tourists got lost looking for a good kimchi restaurant on the wrong side of the Yalu.
Nope, wrong again. In 1637 the Manchu dynasty invaded Korea and forced the Korean monarchy to recognize the Manchus as guarantors of their authority. Do they even have history books in China?
I'm not to sure what your point is in that the Qing and the Manchus were the same people. Writing on parchment predated the invention of paper by nearly 3,000 years so what is the value of such a claim except that it brought the price down. But in an illiterate society what are the value of what is being written on when no one except the elite can read them?
OK, the biggest losers in this crisis will be the ones who actually have, except China, more or less structurally sound economies. The struturally weak ones, who have relied (and still rely) exclusively on their credit reating to first go on a credit fuelled spending binge and now on a credit fuelled bailout-binge will be the winners?
Gravity, Don, is a very powerful force.
The crisis is not rooted in a lack of demand, but in the aforementioned credit bubble. And all the recession is trying to do is to sweat all the crap through the system. Except that the fever, which is a necessary and good thing, is declared enemy number one and everybody tries to eradicate it.
Even if industrial output in the strong countries has fallen by double-digit numbers, it does not mean a lot, because the starting point was extremely high. Oder intake in German industry is still way above 2004 levels, in itself not such a bad year.
Depends upon what you think is strength, Soli.
Countries which have a large ratio of productive workers to dependents are strong in the present, but countries with quantities of children which are relatively wel-cared for and educated are strong in the future. Countries which have a demographic imbalance (few children/young workers, many mature workers) are actually weak in the long term even though they may be running huge trade surpluses in the present.
This effect can be brought forward by a economic crisis, because countries with weak demand caused by demographic factors are implicitly dependent upon countries with younger populations to provide demand. If those export market countries are unable to buy the goods you sell, you are looking at hard choices.
Besides, see who Obama is respecting :
http://www.youtube.com/watch?v=9WlqW6UCeaY
poor Queen !
Look at that bow to the Saudi King. Holy Shiite! The conspiracy nuts will go crazy.
Obama is so hard to figure out.
Theory A: He is still new at all this and still learning. He is making up for his clumsiness with England's Queen by being extra polite to the next Royal he meets. Theory B: Its all part of the plan. Obama is no Muslim (secret or otherwise), but he is signaling a willingness to re-orient US Middle East policy away from Israel and towards the Arab world, as evidenced by his relationship with Rashid Khalidi, Nation of Islam, Chas Freeman, etc.
To be fair, there are alternate theories due to Obama's appointment of Rahm Emanuel and noises he has made to AIPAC...as I say, he is hard to figure out.
one thing is sure, he is not going to work for Europe
Well at least we'll have some peace on this side of the pond :lol:
PS) I wonder if he bowed to the president of China
you who you may be, I am not fantasing on you, so to say, that your explanations aren't of what we could expect for "rational's" too. So you'd better think to eat your Nems before a truck takes you into a parallel world
Joe is Joe, and I am what I am, we both know which part we are playing on the chess, and it seems that these rules escaped from your understanding
got a nitendo chameleon on my back LMAO
Tag, you're it! And you've got a new "best friend." Logic will not work I would suggest Terminex.
don, see what will happen to your people
http://www.dailymail.co.uk/news/worldnews/article-1165416/Chinas-hi-tech-death-van-criminals-executed-organs-sold-black-market.html?ITO=1490
Nah, Marie. That fate is reserved for the citizens of countries unable to defend their citizens....
Like France?
never, we have big Saeko that surveys !
BTW, Michelle offered a guitar to Carla, she was more inspirated than for the Brits !
I wonder what got Angela !
the chineses are invading LMAO
I repeat, the Chineses are invading !!!!
got to get our secret arm in action : FLUE, hello chickens !!!
You mean a spammer has invaded this forum, Marie? Could be.
It's rather entertaining to read the anti-British rants. I think my feelings are supposed to be hurt; like if I were to write anti-Franco rants in order to hurt your feelings, eh? Not quite on target, Nr. Spam. You should look further west....
I think my mild concerns are being taken as anti-Chinese, when actually what I'm opining is that the current Chinese government is far from the worst possible; on balance it has performed rather well in my opinion.
I am worried about what could happen to China; I don't think Hitler is likely, but I could visualize something like the Kaiser - an arms race followed by a war. Or perhaps a descent into a period of regional power like the warlord period.
anti-Franco ???, bizarre I have that rant vs a pro-Franco lately... the real Franco :lol:
a war would solve many problems : global-warmists are complaining there are too many souls on the planet, too many young males without future and whose energy needs to be spent, rampant unemployment, geopolitical redefinitions... yes, I expect that this is what the Chineses are on, and O is saying that he loves the muslims and that he is cutting the arms budget down... he is preparing the global government for the serfs
If I were trying to anger you I would take aim at a closer target than Franco. I might write something disrespectful of DeGaulle, or a tirade against Loire wines, or perhaps opine that all the Roquefort ought to be dumped in the Tarn Gorge. Not true of course - they should ship all the Roquefort to me gratis; I will eat it.
Disrespecting the British to anger an American is difficult, even when that American is living in London. I perfectly understand disliking the UK, we revolted after all! It's disrespecting the benign American governence which might get under my skin. But even there I think the effort needs to be a bit more subtle than Mr. Spam seems to understand....
Just don't say anything against Wisconsin Cheddar cheese or the Green Bay Packers, Marie. Some things are sacred.... ;)
Speaking of Loire wines - I'll have some of that also. If anyone has a good english history of DeGaulle lying arounbd I'll take that too..... ;)
I think I have the perfect insult: Franco was a Frenchman, and DeGaulle was a Spainiard.
You like it?
Germany is absolutely not the enemy of world trade. I think many Germans fail to realize that trade doesn't happen naturally during a depression because what people can't afford to buy they don't buy, and the German economy depends
upon export markets in countries where economic conditions are rapidly declining. Eastern Europe is in a liquidity crisis which needs to be eased. The local governments don't have the resources. The US isn't going to be able to do it, it has bigger problems closer to home, both in the US itself and in Latin America. So either Germany/France/Scandinavia do something or Eastern Europe continues to sink.
If it continues to ink, where will Germany export it's machine tools, it's cars, it's other surplus goods?
ah that was you that person that pushed the button on de Gaulle and defended Franco, umm what about the Kabyles then :lol:
don't know about Wiscontin Cheddar and the Green Bay Packers I surely miss something there, never saw them in Hollywood movies !
ummn, I'm sayingg something on the Germans now, O didn't want to go on Obama beach cuz Angela wouldn't appreciate it
umm, in Brits papers !
in french papers, because O didn't appreciate that Sarko endorse the previous american administration pro-war policies, that's why he paid Chirac with a letter first !
also that he wants that France reduce her nuclear program,
umm, isn't it a bit "naive" ?
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