by Alex Evans | Jul 9, 2009 | Economics and development, Global system
Never mind what the commentariat thinks: for the real take on how the G8’s panning out, take a look at how the markets are reacting. John Authers:
For currency traders, the G8 was notable solely for what was not said and for who was not there. Rhetoric suggested the summit would be the “high noon” for the dollar as a reserve currency, as China pushed for a more diversified anchor for foreign exchange.
But currencies are not even mentioned in the draft communiqué. China’s premier was not present for the discussions, thanks to trouble at home. The showdown on the dollar’s future did not happen. Rather than dancing to the tune of the world’s leaders, forex markets suffered a new wave of aversion to risk.
That wave started in the commodities market, where prices dipped sharply. The CRB index, a broad index of commodity prices, dropped to its lowest level since early May, pushing below its 200-day moving average – a strong signal that its rebound of the past few months was over. The CRB is down more than 12 per cent since it topped out last month and is 51 per cent below its high set last year. This implies that deflation – falling prices and stalled economic activity – is a much greater risk than the resurgent inflation that was being talked about only weeks ago.
Gold, an inflation hedge, fell 2.2 per cent and is now down more than 10 per cent since it hit $1,000 per ounce in February. In currencies, the Japanese yen, which gains when people are anxious, made dramatic and sudden gains against the dollar and the euro. This could increase pressure to intervene to keep the currency cheap.
These developments are alarming. The pendulum in the debate between inflationists and deflationists has swung back to the deflationists – at a point that inflation still looks the lesser evil. But at least risk aversion will help the dollar avoid further falls and delay the moment when it is replaced as a reserve currency.
by Richard Gowan | Jul 9, 2009 | Global system, Off topic
What on earth is going on here?
The only reasonable interpretation is that our leaders are attempting to re-enact a scene from Michael Mann’s excellent 1930s gangster film Public Enemies (sample line: “how long does it take you to go through a bank?”).
Alex adds: well, given the gangsta hustla manner in which he arrived, it was clearly always going to end this way. I blame Putin.
by Richard Gowan | Jul 9, 2009 | Climate and resource scarcity, Cooperation and coherence, Europe and Central Asia, Global system
Further to Alex’s grovel below, it’s time for me to clarify my position on Italy’s place in the G8. Yes, I was the one named source in the Guardian’s piece entitled “Calls grow within G8 to expel Italy as summit plans descend into chaos”, reproduced in almost every Italian newspaper and then some. Yes, I called the Italian preparations for the G8 a “gigantic fudge” – ably translated “una buffonata colossale” by Corriere Della Sera. And, yes my boss Bruce Jones then gave a series of quotes broadly backing me.
However, let’s get one thing clear: neither Bruce nor I have at any point advocated chucking Italy out of the G8. I for one think that it is a silly idea.
Sure, preparations for L’Aquila haven’t gone great. But almost all G8 planning processes are a mess – some hosts just get luckier with the outcome documents than others. The question of whether Italy should be there or not is a total distraction. The real question is not which Europeans are at the G8 or G20, but how well they coordinate there. As Bruce and I note in today’s European Voice, the record is mixed:
Europeans frequently fail to use their influence efficiently. The run-up to the London G20 summit was enlivened by intra-European spats, with French President Nicolas Sarkozy threatening to walk out if France’s interests were not satisfied. There was little real co-operation between the UK diplomats planning the G20 and their Italian counterparts on the G8.
Italian officials indicated that they would shape the G8 agenda to meet any requests from the Obama administration, but US officials complain that what they really want from the Europeans is some coherence – to allow more time bargaining with the Chinese and Indians, and to spend less time having to worry whether the Dutch or Italians [sorry Italians!] are on side.
What to do? We have a plan:
France will be Europe’s next G8 hosts, in 2011. It should start co-ordinating within the EU and with the Canadians, who host the 2010 G8, and the Americans, who take the reins in 2012, on how to deliver sleek, workmanlike summits that include China, India and other emerging powers as full partners – rather repeat the confusions of L’Aquila.
So there, we are constructive, nice people after all. And pro-Italian. I celebrated my new-found notoriety at the excellent Sorella on the Lower East Side. Go there, New York-based readers and have the pate de fegato:
by Alex Evans | Jul 9, 2009 | Europe and Central Asia, Global system
Earlier this week, Global Dashboard contributor Richard Gowan spoke to the Guardian newspaper about the G8 summit, during which he made certain remarks about Italy’s preparations that might be construed as offensive. Specifically, he said that:
“The Italian preparations for the summit have been chaotic from start to finish. The Italians were saying as long ago as January this year that they did not have a vision of the summit, and if the Obama administration had any ideas they would take instruction from the Americans.”
Asked about the fact that between 39 and 44 heads of government would be attending the summit in L’Aquila, Mr Gowan added that,
“This is a gigantic fudge. The Italians have no ideas and have decided that best thing to do is to spread the agenda extremely thinly to obscure the fact that they didn’t really have an agenda.”
Mr Gowan’s coments were made in the context of an article entitled “Calls grow within G8 to expel Italy as summit plans descend into chaos”, which suggested that Italy might be ejected from the G8 in favour of Spain. While the article also quoted other sources, Mr Gowan was the only one who spoke on the record, and hence bears a particular responsibility for what followed.
The next day, Silvio Berlusconi strongly rebutted Mr Gowan’s claims at a press conference, calling the Guardian’s report “a colossal blunder by a small newspaper”. Foreign minister Franco Frattini added that: “I hope that the Guardian is expelled from the great newspapers of the world. What the Guardian says is a joke – nonsense.” Defence Minister Ignazio La Russa has also called for a boycott of the paper.
Global Dashboard takes very seriously the clear and justified sense of hurt felt by the Italian government, and wishes to underline that Mr Gowan’s intemperate remarks do not represent the views of this blog, which regards Mr Berlusconi as an international relations powerhouse.
We would like to place it on record that we believe him to be a beacon of good governance and commitment to international development, and that we disdain the various groundless slurs made on his personal behaviour in recent months. We also strongly support his bid for the Nobel Peace Prize.
by Richard Gowan | Jul 8, 2009 | Conflict and security, Global system, North America
Ban Ki-moon has come out fighting against recent criticism in a pretty strong interview with AP. But I’d hoped not to hear this cliché about leading the UN ever again:
“You don’t see any other nation or government or even private organizations where you have equally important 192 shareholders,” Ban said. “How to balance all these different 192 countries, that is quite time consuming.”
Feel familiar? Here’s Kofi Annan in 2006:
Sometimes it’s hard to get agreements across the board. But one has to persevere. When people say: “The secretary is like a CEO,” I would love to see a CEO manage his company with a board of directors of 192 and has to get things done as effectively and efficiently.
Now, I suspect this cliché is almost as old as the UN. But in Annan’s case, he was parrying Senator Norm Coleman, now the just-ex Senator from Minnesota. Back in the day, Coleman was Annan’s nastiest American foe, demanding that the SG resign over the oil-for-food scandal. Like this:
It’s time for Kofi Annan to step down. The massive scope of this debacle demands nothing less. If this widespread corruption had occurred in any legitimate organization around the world, its CEO would have been ousted long ago, in disgrace. Why is the U.N. different?
So, for old-time (well, not that old-time) UN watchers, at least the “CEO+192 shareholders” gag reeks of bad times. Don’t take us back there, Mr. B.
