It seems as if the G20 Summit did enough to give equity markets a rare moment of euphoria – as has become common during the Global Financial Crisis, “markets” get all excited whenever there’s more regulation and government takes on more responsibility for facilitating trade and the provision of finance for credit markets. Bankers and hedge fund types aren’t over the moon, though, reports The Guardian, which has a useful section full of extensive coverage of the summit and its outcomes.
Domestically, The Australian appears to have reverted to its previous incarnation as the Government Gazette, printing oodles of stuff which appears to be Rudd government spin – the corner has been turned, a recovery budget is being framed, Rudd has established himself on the world stage, etc, etc.
Whether or not we’re looking at an early recovery is somewhat questionable, but it appears to be the current orthodoxy. The turnaround on the stimulus question at the G20 does enable the Australian government to square the policy circle and eschew pressure for more stimulus packages, as well as outline a “medium term fiscal strategy” in next month’s budget which will enable a narrative of “economic conservatism” to be revived. Thus the Opposition will be further marginalised, with even the skerrick of an economic story they have taken away from them.
But, while the G20 has done some tinkering around the edges in terms of restraining “excesses”, claims that an era of “moral capitalism” has been inaugurated appear somewhat hyperbolic. The presumption behind moves such as the use of the IMF to provide trade financing is that we can get back to business as usual soonish. I doubt, though, whether the toxic asset issue has really been sorted, and the other big unanswered question is what new sources of value creation might arise from the “creative destruction” we’ve been living through – as Saskia Sassen points out in Open Democracy, one way of looking at the various state interventions is that they constitute the last frontier for financialisation – sucking public money into the same financial sector which was the origin of the crisis. There are some very big unanswered questions, I think, about whether we’ve “turned the corner” and indeed whether the systemic causes of the GFC have actually been addressed.
You’ve got to be kidding! I don’t think the Oz will ever be the Government Gazette – not when we have a Labor Government. It will always be the Liberal Pravda. Whenever we hear a damaging story about Labor, don’t we all instinctively go to the Oz? Or one Murdoch’s monopoly tabloids if it’s a story with an easy-to-follow human interest angle? The whole reason for the Oz’s existence is the do damage to the Left side of politics (and to print pieces from our right-wing think tanks and dismayed reactionary corporate types). What hope is there for the Left when we can’t even work out who is against us?
Progress was made, but we’re a long way out of the woods yet. The latest job numbers in the US are very, very bad. I still think temporary nationalization of major US banks will have to take place before credit starts flowing properly again.
Encouragingly, I heard some noise about cracking down on tax havens. Does anyone have any more info? It’s great to see America is back in international cooperation/willing-to-sign-treaties mode – in other words, it’s acting like an international leader again.
Domestically, the “progress” that was made out of the G20 was that MurdochInc recognises that corporate capitalism has only one horse in the GFC Handicap. Holding their collective noses, the Oz hacks cleaved to Rupert’s line and gave Rudd a big tick. What choice did they have?
But as Saskia Sassen observes in the article thoughtfully linked by Mark:
Thus, the Oz has joined Kevin Rudd and the rest of the G20 singing hymns on that listing Titanic deck.
You’ve made the common error of conflating capitalist agents with capitalist theorists.
Traders are just people who want to turn a buck. They don’t care about the theory very much. Promise them free money, reduced risk, that the good times are back, free blow and hookers for everybody; sure, they’ll perk up.
Capitalist theorists tend to less interested in the day to day. They are the ones pointing out that the money is not free, the risk is actually increased, the good times promised are probably an illusion, and that there ain’t no such thing as free blow and hookers.
Otherwise put, economists do not suppose everyone thinks like economists. They assume that people are, by-and-large, self-interested. Self-interested people like government bailouts at the expense of taxpayers. That doesn’t mean it’s a good idea.
Katz
Saskia Sassen has basically nailed it. At least until the last bit. There will be no golden age of Regulated Capitalism that fixes Global Warming and enriches the global poor. The US cannot allow this; as it will open the gates for the dominance of China and the “Asiatic hordes” The imperial imperative will require that the US destroy China – one way or another.
The Ruddbot’s sudden ambivalence about the China indicates to me that he has been heavied big time by the dark side of the Obama administration. The US must encircle and destroy China or disappear into the ranks of once empires.
Huggy
It indicates to me that a regular ALP focus group showed people were listening to the coalition about Rudd’s sino-centrism.
Jacques; be that as it may about the focus groups. I stand by my analysis that the US cannot afford to relinquish its position as the number one Imperial power. The crisis has weakened it and proportionally strengthened China. The talk of a new global currency to replace the weakening US dollar is but one indicator of the slide.
My fear is that the longer term response of the US to the present crisis will be to go even more agro. To attempt to “contain” China. The President may talk of soft power but he carries a big stick and will be out of office or dead if he refuses to use it.
I doubt if the US is any exception to the rule of military conquest that accompanies the fall of any empire. That has been the history of empires since the beginning of “civilisation”. The Imperial adventures in Iraq, Afghanistan and Iran are as much signifiers of decay as of strength.
Huggy
Meanwhile, in other news.
The USA will have to give up top billing to China much as the UK gave up top billing to the USA. You may have noticed that both empires are protected by the sea. Failing empires which were invaded were accessible by land from hostile neighbours.
There’s no practical way for the Chinese to invade the USA, or vice versa.
Jacques, China is complaining of a US project to encircle it. In any event the preferred method will be to bomb it back to the Ming dynasty; this will make them feel really good about being American and God’s chosen punisher of uppity oriental heathens. I am not joking, there are senior US military men who actually talk like that.
Huggy.
That suggests capitalist theorists should all eschew their “small government” ideology, then, Jacques!
Whatever happened to that notion about the distributed wisdom of the markets, too, I wonder?
Not only senior US militay men HuggyBunny, if China gets too uppitty, bombing it back to the stone age is an option we should keep open.
A war against China is one we cannot afford to lose, & the only way to handle it is to make a proper Hiroshima of the place.
Capitalism can survive the demise of the United States.
The interesting geo-political question is whether the United States can avert its own demise without embracing a large component of anti-market corporatism that characterised right-wing totalitarian regimes in the 1930s.
Oh I don’t know Steve. How about we just sell them ores and coal and stuff?
Make nice to them, eat lot’s of Chines tucker and even marry some.
Better than war.
Saskia Sassen is worth a second read. Trouble is I am also reading the “Doomsday Men” by P.D.Smith.
That is a book about the proposed US doomsday cobalt bomb that was to totally destroy the world if the commies were about to win the war. It is not a work of fiction, that’s the problem.
Huggy
Ginja writes, “I don’t think the Oz will ever be the Government Gazette – not when we have a Labor Government. It will always be the Liberal Pravda.”
Have you looked at Pravda lately? It’s pictures of hot chicks, strange animal stories, opinion pieces on why the USA sucks, murder and bizarre accidental death stories, and pictures of Russian tanks.
If only the Oz were like that! It’d be a lot more entertaining.
Katz , the groundwork for a totalitarian regime has been well and truly carried out by the Bush regime. The new President is not doing a real lot of winding back.
If the US wants to ramp up its imperial program to save its arse it is going to have to get all Fascist at home. Does the Military Industrial Complex qualify as anti-market corporatism BTW?
Huggy.
HB, Bushite innovations nibbled around the edges of corporatism.
Serious embraces of corporatism may include:
1. Official repudiation of government loans.
2. Prohibitions on the transfer of currency.
3. Wage and price fixation.
4. Manipulation of exchange rates.
5. Officially-set interest rates for retail borrowers and lenders.
It’s still around. In Austrian circles it’s generally held that centrally-controlled money is two-thirds of how we got into this mess, the other third being government-owned Fannie and Freddie. That’s the unwisdom of governments massively distorting the markets. As a proportion of GDP the finance industries expanded more or less in line with money growth because they were first in line for new dollar bills and T-notes. It’s not rocket science.
You’re still assuming that actors in the market actually want to be in a market. Most of them don’t want to be. They’d rather get things by fiat, rent seeking etc etc. It’s much easier.
What makes me dismayed about the current crisis is that Austrian economics has the best theoretical fit for how it came about, but it’s still being ignored. Instead zombie Keynes is back from the dead. Zombie Galbraith can’t be too far behind with the price-fixing, Katz.
Katz, I need o think about that. Some of the words are biggies.
A war against China is one we cannot afford to lose, & the only way to handle it is to make a proper Hiroshima of the place.
A better way to handle it is to not get into war in the first place. It is not possible to nuke a country the size and population of China without plunging the rest of the world into nuclear winter. The result would be lots of dirt in an ozone-deficient atmosphere, causing a global temperature drop of a couple of centigrades. On the bright side, we won’t have to worry about AGW any more.
Be serious with your “Sino delenda est” fantasies, SATP. (And HuggyBunny – stop panicking.)
That WAS assuming that Peking kicked things off in the first place. In the event they did, it wouldn’t be a sideshow (ie, Iraq/Afghanistan) it would be a war for survival. Instead of indulging protestors marching in the street siding with the enemy, we’d be machine-gunning them.
That WAS assuming that Peking kicked things off in the first place.
They’re hardly likely to do that. Correct me if I’m wrong (and I may be) but isn’t the People’s Liberation Army the biggest business and investor in China? When you’re one of their generals, the gravy train never ceases. You get to buy jewelery for your mistresses, and can send your children to study in Australia. Why would they want to wage war on the west? Their kickbacks would cease.
Nuclear combat, toe-to-toe with the
RusskiesChiComs? Count me in for a bit of missile-counting.The PRC is one of the relatively few countries in the world with both a a technically credible nuclear deterrent capacity and the necessary political will to use their deterrent (on these grounds I rule out the UK, France and Israel from the nuclear club). FAS estimates the Chinese nuclear deterrent at under several hundred warheads, but notes that:
Let’s imagine both scenarios Steve At The Pub has suggested: one, a non-nuclear conventional war with, and two, a Chinese nuclear first-strike on, one or several countries allied with Australia. This explicitly makes the United States a participant, and the Pacific Ocean the major battleground, with Taiwan presumably the flashpoint. Fair enough, it’s a pretty volatile dispute and the Taiwanese ruling class are a pretty foolish bunch, as a rule.
We can rule out the second scenario entirely. The PRC’s nuclear capability is too small to ensure the success of first-strike against the continental US, which maintains (as Down And Out Of Saigon says) quite sufficient a nuclear force to vaporise mainland China and destroy the climate in one glorious ballistic frenzy. The point of China’s maintenance of The Bomb is not to win wars, but to prevent them; it stopped the US since the Korean War from interfering in PRC affairs, and it threatens US carrier groups against doing so today. Needless to say, India, Russia, and Pakistan are the major nuclear targets for Chinese warplanners.
We can also rule out, at the moment, the first scenario: the Chinese ruling class and Party currently get everything they want from the rest of the globe simply by buying it; the issue of Taiwan excluded, they’re a peaceful, if tyrranical, state capitalist dictatorship. Imagining a decline in China’s power to economically dominate the world, they have a great deal more to fear from their own massive underclass, who accept the CCP’s legitimacy only to the extent that it provides economic growth, and the idea of the PRC striking out in a nationalist frenzy in their own Imperialist decline is fanciful. Steve, if you’re enjoying fantasising about the Australian Army turning their Minimis against the papier-mâché heads of the Stop The War Coalition (and I’m not one to judge, trust me), you may find better fap material in the struggle the Communist Party would have defending their tyrrany.
Let’s face it. The major strategic tool with which China projects force isn’t military, but financial.
Q. Of all the countries in the world which was the one that was so barbaric and depraved that it used the nuclear bomb on innocent civilians? All the “leaders of the free world”, “God,s chosen nation” and “the most civilised nation in the world” needs is an excuse. They would bomb Iran, China, North Korea, Cuba even; if they could convince the rest of the world that it was justified and they could profit from it. The US bloody adventures in Iraq , now Afghanistan and earlier in Vietnam should convince us of that. How many dead and maimed women and children, how many torture chambers and extermination camps does it take to convince us that this is not a smiley benign Uncle Sam ? Will the new president change all this ? No he will not.
Huggy
http://www.atimes.com/atimes/Global_Economy/KD03Dj02.html
.
Hope this link works. Maybe a kind reader will inform us if “netting” will allow this debt to be fiddled away ?
From the way people seem to be reacting to the G20 the main effect seems purely about confidence . Mind you that is confidence in the midst of many predictions that even worse news is only the next story away.
Workers in the markets don’t all accept the idea that things have improved – some even suggested the preG20 stories about discord where just rumours to shake out the market and trade the bounce!
Without specifically addressing the debt problem everything else is blatently posturing and at the same time clever politics.
“In effect, the only tangible result of the G-20 meeting – the tripling of IMF resources – is astounding. The same people who drove the Latin American economy into dust and were responsible for widespread poverty in Asia in the aftermath of the Asian crisis; the very people who encouraged the idiotic accumulation of market-return independent foreign exchange reserves by Asian countries that subsequently caused the asset bubbles of the US and Europe; the very people who had no clue about the impending bubble burst up until the beginning of 2008, are now supposed to gather up the foresight and skills required to end an economic crisis whose only recent historic parallel was the 1929 depression in the United States; an event that took place a good 16 years before the IMF was itself created. ”
.
http://www.atimes.com/atimes/Global_Economy/KD04Dj04.html
A longish article from Asia Times Online correspondent who attended the G20 meeting.
“In the current global unpleasantness, there are alas no world leaders with Liverpool’s economic grasp (having David Ricardo as economic advisor doubtless helped). Even compared with other recessions within living memory, such as 1974 and 1982, the reaction from the global political class has been notably panicky and hysterical – US$5 trillion of global stimulus programs, largely consisting of public spending, are unlikely to increase the stability of the global economy, and nor are the moves by three of the world’s four most important central banks to “quantitative easing” – the monetary policy of the early Weimar Republic.
Under Weimar, the profits from “seigniorage” – the issue of new money – financed around 50% of public spending in 1919-23. Notoriously, this resulted in a trillion-fold devaluation of the mark by November 1923. In the United States today, around 15% of public spending is being financed through seigniorage – the Fed is purchasing $300 billion of Treasury bonds over six months, an annual rate of $600 billion per annum, 15% of 2009 federal spending of $4 trillion.
The US may still be the right side of the Weimar dividing line, but in Britain the figures are more alarming. The Bank of England is purchasing 75 billion pounds of gilts over three months, an annual rate of 300 billion pounds per year or more than 65% of Britain’s projected 2009 central government expenditure of 454.6 billion pounds. Of course, the Bank of England may not repeat its gilt purchases every three months, but at least in the short term it is disturbing that Britain is currently “printing money” faster than Weimar Germany. ”
.
Another article – this time for those worried about the recent dead cat bounce and currency devaluations.
http://www.atimes.com/atimes/Global_Economy/KD08Dj02.html