The G20 summit, and the results thereof

I originally titled this post

"!!!SHOCKING NEWS!!! International conference not complete waste of oxygen!"

but decided against it as it's not really all that informative.

I'm surprised, and in a good way. This very rarely happens with international politics.

The G20 summit might not quite be the turning point that the Hoper-In-Chief makes it out to be, but it did actually accomplish a trillion bucks' worth of concrete action, and laid out a whole bunch of rules that may or may not eventually be followed. This almost never happens in conferences like this.

The trillion bucks the stabilization funds got will make a significant practical difference, but IMO it's more significant that countries as diverse and (generally) as intransigent as Germany, France, the USA, the UK, and China managed to pull together on it. My biggest fear about the crisis is that it sparks a cycle of beggar-thy-neighbor protectionism, which leaves everybody as beggars — which is what happened in the '30's. This conference just created a precedent for real, significant, international, multilateral action. That is grounds for hope.

We're a long way from home and dry (or even "home and vigorously toweling ourselves off," as the immortal Doug Adams put it), but this is the first development since the crisis blew up that suggests that we might be able to pull this off after all.

(Oh, and — credit where credit is due: this happened in no small part due to American leadership. And you managed it entirely without threatening to invade anybody, which is also a refreshing change.)

Pretty damn impressive, have to say I'm supprised they got an agreement given all the pre-meeting muttering. Good job Obama.

I am not so sure about this, all these packages are going to leave most countries in a huge debt and US debts is already sickingly huge.

Originally Posted by GothicGothicness
I am not so sure about this, all these packages are going to leave most countries in a huge debt and US debts is already sickingly huge.

Actually, the US government debt is about average for industrialized countries; there's no immediate problem there — the problem is if the deficit can't be brought under control within the next few years, in which case it will become genuinely nasty.

The whole idea with the package is to create a fund for emergency aid to countries that genuinely do have crushing debt, and risk bringing down larger structures if they default.

IOW, there are certainly reasons not to like it, but your ones aren't very good.

So far the debt is

$11,042,553,971,450.47

and keeps growing with all these packages.

that gives US Gross Debt as % of GDP at around 80%
On top of that GDP is predicted down, debt will keep going up.

If you see this as a none problem you had better reconsider.

The outcome felt like a nice surprise, definitely above expectations even if they were quite low beforehand.

GG, You seem to be sharing the view of our government that we simply can't afford to stimulate much, if at all, both on a global and a domestic scale. Luckily I don't think our take on the matter is very important globally but can we domestically really afford NOT to stimulate? This is about putting otherwise unrealized potential in the economy to use, it's in everyone's interests to not have large parts of it stand idle.

Predictions for our GDP this year is it shrinking 3-4 %, with our finance minister's opinion on the pessimistic end of the scale, and still all we hear from the government is talk about the virtue of keeping spending down. True normally but this is not a normal occasion and I had expected Reinfeldt and Borg to be more pragmatic about this to be honest.

Originally Posted by Prime Junta
(Oh, and — credit where credit is due: this happened in no small part due to American leadership. And you managed it entirely without threatening to invade anybody, which is also a refreshing change.)

Just imagine the progress we could have made with a troop movement or two…

OK, OK.

The talkie talkie actually made some concrete progress. For once. By some miracle.

Originally Posted by GothicGothicness
So far the debt is

$11,042,553,971,450.47

and keeps growing with all these packages.

that gives US Gross Debt as % of GDP at around 80%
On top of that GDP is predicted down, debt will keep going up.

If you see this as a none problem you had better reconsider.

That's a pretty typical number for an industrialized country. If the US doesn't manage to balance the budget once the economy starts to recover, it will certainly *become* a problem — but it's not one yet. It's worse than Sweden, but much better than Japan, and the US has the additional advantage that almost all of that debt is in its own currency.

GG, You seem to be sharing the view of our government that we simply can't afford to stimulate much, if at all, both on a global and a domestic scale. Luckily I don't think our take on the matter is very important globally but can we domestically really afford NOT to stimulate? This is about putting otherwise unrealized potential in the economy to use, it's in everyone's interests to not have large parts of it stand idle.

I was acctually not talking about sweden, if you look at our situation it is much more stable than the US one, our gross debt % of GDP is quite small compared to many other countries. Thank you very much that we have been responsible for some time!!!

You will probably ask me why I do not blaim Japan much more which has 180%, but it is different you also have to look at who the debt is to. If a large part of the debt is to the countries tax payers that's one thing, like the case of Japan.

However in the case of USA almost half the debt is to other countries, about 25% of that is to china ( they are scared as hell, what if US go bankrupt or the $ plummit, it is no secret china kept making sure of the rate between RMB and $ Obama was even pissed for this ) , a large part 20% is to Japan, and a part of it 0.4 % is acctually to Sweden.

To owe tax payers is one thing, to owe another country is another. It's not like China will say,, oo poor US we will not demand that you pay any interest and we will write off the loan since you are in an economic down turn.

Another point is that US has the largest GDP, and the pure amount of their loan make it dangerous for the rest of the world.

Originally Posted by GothicGothicness
To owe tax payers is one thing, to owe another country is another. It's not like China will say,, oo poor US we will not demand that you pay any interest and we will write off the loan since you are in an economic down turn.

What you say is true for every other country than the US, because countries that owe foreign creditors usually have debts denominated in foreign currencies. This means that if the shit hits the fan, the local currency will fall but the foreign debt will remain, which means that the value of the debt as measured in the local currency will shoot up into the stratosphere just at the very moment the country has the most trouble servicing it. This is what happened most recently in Iceland.

With the US, this isn't the case. The foreign debt is just about entirely in dollars. This means that if the currency weakens, the debt shrinks to match it. Unless and until the US government is in actual, real danger of defaulting (and despite the grim news and The End Is Nighing that's going on, we're still very, very, VERY far from that point), the interest rate for the debt will stay pretty low too.

IOW, with the USA, owing money to foreign governments IS economically exactly the same as owing money to its own citizens. The difference is that there may be political complications, and the foreign creditor governments gain a certain amount of political leverage as well.

So, in the doomsday scenario that you're referring to (the US not being able to service its debt at all), China won't be able to do a damn thing about it. The dollar will simply collapse to nothing and take the debt with it. The USA won't even have to go through the tedious process of formally defaulting — they'll just hand over a check for 11 trillion dollars, and the Chinese premier can then go and by a Happy Meal with it.

(Of course, for this to happen, the US economy will have to be screwed up orders of magnitude worse than it is now.)

Another point is that US has the largest GDP, and the pure amount of their loan make it dangerous for the rest of the world.

The *debt* isn't the danger. The *deficit* is. The international economy is badly out of balance, with countries like China and Germany (and, in a much smaller and less significant way, Sweden and Finland) running massive trade surpluses — because the USA has been running a massive trade deficit. We're going to have to learn not to export so much, just as the USA will have to learn not to import as much. 'Cuz if someone's running a surplus, someone else will have to be running a deficit.

But right now the first order of business is to fix the financial sector and break the deflationary, recessionary spiral. With that done, we can get to the painful work of rebuilding the global economy without the imbalances that got us to this point. China will have to build up its domestic market and export less; the USA will have to learn to live within its means and import less. It won't be all fun, but it won't be all doom and gloom either, and we'll all end up better off for it.

(Hell, I'm actually starting to sound optimistic here. I'll have to go read some more Nouriel Roubini to get that sorted out pronto.)

So, in the doomsday scenario that you're referring to (the US not being able to service its debt at all), China won't be able to do a damn thing about it. The dollar will simply collapse to nothing and take the debt with it. The USA won't even have to go through the tedious process of formally defaulting — they'll just hand over a check for 11 trillion dollars, and the Chinese premier can then go and by a Happy Meal with it.

Indeed, as I wrote in the brackets that's china's biggest fear, but what do you think happens to the US which rely so heavily on importing if the $ reaches such a low value ? and what do you think happens to China / Japan US relationships ?

China will have to build up its domestic market and export less; the USA will have to learn to live within its means and import less.

I could not agree more, I also wrote how important it was in another thread, and on top of that it is much better for the environment.

Another point is that US has the largest GDP, and the pure amount of their loan make it dangerous for the rest of the world.
The *debt* isn't the danger. The *deficit* is.

My point was that if Sweden have a huge debt they could not pay, that's bad news for Sweden, the rest of the world could "care less" or at the very least it is not such a huge deal it is small money to them even if they didn't get it. If Japan got none value $ from US for that 20% it would be a huge hit on them………………… so basically we are saying the same thing I guess ??

But right now the first order of business is to fix the financial sector and break the deflationary, recessionary spiral.

That I could agree to, the question is how we should solve it? My idea of solving it is not by making huge debts and inbalances even bigger, and increasing consumption which has already been too high for a long time. We have a chance to change and make people realise they could not have 4 houses 3 cars, and throw away half of the food every day… and make every economy stimulation in an environmental friendly direction. Which a lot of gouverments already did ( I am happy for this )

With that done, we can get to the painful work of rebuilding the global economy without the imbalances that got us to this point. China will have to build up its domestic market and export less; the USA will have to learn to live within its means and import less. It won't be all fun, but it won't be all doom and gloom either, and we'll all end up better off for it.

This is what we had different ideas and discussed in another thread, where I said consumption has to go down, and you disagreed, I do not see US average person having the same spoiled standard without importing….. ?

To round up isn't it inresponsible loans that started all of this? so let's be careful with those ???

Originally Posted by GothicGothicness
Indeed, as I wrote in the brackets that's china's biggest fear, but what do you think happens to the US which rely so heavily on importing if the $ reaches such a low value ? and what do you think happens to China / Japan US relationships ?

Disaster would happen, of course. It might, one day, but we're not anywhere near that point yet.

My point was that if Sweden have a huge debt they could not pay, that's bad news for Sweden, the rest of the world could "care less" or at the very least it is not such a huge deal it is small money to them even if they didn't get it. If Japan got none value $ from US for that 20% it would be a huge hit on them………………… so basically we are saying the same thing I guess ??

Basically. I just don't think the scenario you appear to have in mind (the US being in danger of defaulting on its debt, or of the dollar collapsing Zimbabwe-style) is so unlikely that it's a bit of a waste of air to spend much time thinking about its consequences (even if it's a good idea to think about how to avoid it).

That I could agree to, the question is how we should solve it? My idea of solving it is not by making huge debts and inbalances even bigger, and increasing consumption which has already been too high for a long time.

I don't think we *can* solve it without taking on more debt — although I'll certainly give you imbalances and consumption. Stimulus should be targeted toward investment, not consumption, and toward domestic demand, not imports or exports. But it would be a huge mistake to impose strict budgetary discipline now; that would turn a nasty recession into a deep depression for sure.

We have a chance to change and make people realise they could not have 4 houses 3 cars, and throw away half of the food every day… and make every economy stimulation in an environmental friendly direction. Which a lot of gouverments already did ( I am happy for this )

Absolutely. However, I'd add to that that not all private consumption is bad, either — for example, we could set up incentives so people could trade their old, big, and high-consumption cars in for new, small, low-consumption one instead.

This is what we had different ideas and discussed in another thread, where I said consumption has to go down, and you disagreed, I do not see US average person having the same spoiled standard without importing….. ?

US living standards will drop, temporarily at least.

Our disagreement was about inputs versus outputs. You appear to consider consumption in a narrow sense, "consumption of material goods that require consumption of natural resources." I'm considering consumption to be a broader category, which includes things like services and, for example, recycling. IOW, I see no reason why aggregate consumption can't keep going up, if the structure of the consumption changes so that we can produce whatever we consume in a sustainable way.

To round up isn't it inresponsible loans that started all of this? so let's be careful with those ???

Absolutely. But let's not throw the baby out with the bath water — not all loans are irresponsible, and we need more responsible lending to get out of this mess.

Absolutely. However, I'd add to that that not all private consumption is bad, either — for example, we could set up incentives so people could trade their old, big, and high-consumption cars in for new, small, low-consumption one instead.

Indeed, this would lead to decreased consumption of gas ??? or which ever other fuel the car uses. That's exactly why we in Sweden have a ( trash your old car get a money bonus policy ) this also stimulates people to buy new cars…… and if these cars are environmental friendly they get another bonus…… so for me that's a decrease in consumption.

Our disagreement was about inputs versus outputs. You appear to consider consumption in a narrow sense, "consumption of material goods that require consumption of natural resources." I'm considering consumption to be a broader category, which includes things like services and, for example, recycling. IOW, I see no reason why aggregate consumption can't keep going up, if the structure of the consumption changes so that we can produce whatever we consume in a sustainable way.

I absolutely agree that we could consume as much as we want, if all people in the world have as much as they need and we do not hurt the earth by doing so, but this is unrealistic as of now. Acctually for example what the US people has to change is their input, they cannot want fine china ( only availiable in china ) anymore since it requires unhealthy importing. Again I think we are not far from each others opinions we just have different ways to say it.

I don't think we *can* solve it without taking on more debt — although I'll certainly give you imbalances and consumption.

Absolutely. But let's not throw the baby out with the bath water — not all loans are irresponsible, and we need more responsible lending to get out of this mess.

I think we are in danger here, what were the people in US thinking, I know this loan is a bit risky, but I cannot get a new house without it.

The people lending the money was thinking we need to lend this money in this kind of loan otherwise we cannot make the profit and growth that we want ?

<<<< on a personal note: That's funny chinese are famous for not being careful… swedes are famous for being careful, this country really gets to ya >>>>

Originally Posted by Prime Junta
(Oh, and — credit where credit is due: this happened in no small part due to American leadership. And you managed it entirely without threatening to invade anybody, which is also a refreshing change.)

You don't know what was said behind closed doors.

Originally Posted by GothicGothicness
So far the debt is

$11,042,553,971,450.47

and keeps growing with all these packages.

that gives US Gross Debt as % of GDP at around 80%
On top of that GDP is predicted down, debt will keep going up.

If you see this as a none problem you had better reconsider.

PJ is right. The problem isn't the debt, the problem is if the deficits continue to grow and don't come down to a sustainable level. We're not even close to our worst debt to GDP level (achieved during WWII).

Of course, if you add in the entitlements, we're totally screwed, but at least we can wipe them out with a stroke of a pen if necessary.

Originally Posted by blatantninja
Of course, if you add in the entitlements, we're totally screwed, but at least we can wipe them out with a stroke of a pen if necessary.

If you're talking about Social Security, youngster, I'll be rapping that pen across the room with my +5 steel cane of Arthritis deflection.

Back on topic, I also find this amazing ability of a huge bunch of political leaders meeting, agreeing on a plan—any plan—and accomplishing something moderately tangible to be quite encouraging. If nothing else, it boosts the idea that the problem actually isn't insoluble, and that some kind of floor can be put under things, which has to help.

Originally Posted by magerette

If you're talking about Social Security, youngster, I'll be rapping that pen across the room with my +5 steel cane of Arthritis deflection.

I have no doubt! I'm just saying that they are not the same thing as debt. Modifying the debt (outside of defaulting or inducing large amounts of inflation) is pretty much impossible. Modifying benefits, inception ages, etc. for social security/Medicare is, outside of the politics, technically easy and be adjusted to the circumstances at hand.

Originally Posted by blatantninja
I have no doubt! I'm just saying that they are not the same thing as debt. Modifying the debt (outside of defaulting or inducing large amounts of inflation) is pretty much impossible. Modifying benefits, inception ages, etc. for social security/Medicare is, outside of the politics, technically easy and be adjusted to the circumstances at hand.

Ah, that's all right then. Just watch yer step, Sonny—as the president says, we're keeping score here.

The entitlement thing is definitely the biggest problem on the slate(well, once you get past the recession, deficit, wars, climate change, world going to hell etc) Correct me if I'm wrong someone, but didn't the money for Soc Sec,etc, used to go in a separate untouchable fund and then somehow the Congress got hold of it and started spending like a pimp with one day to live? (My point being, if there had been some foresight for tomorrow, we wouldn't be looking at the same terrifying numbers today.)

Originally Posted by magerette
Ah, that's all right then. Just watch yer step, Sonny—as the president says, we're keeping score here.

The entitlement thing is definitely the biggest problem on the slate(well, once you get past the recession, deficit, wars, climate change, world going to hell etc) Correct me if I'm wrong someone, but didn't the money for Soc Sec,etc, used to go in a separate untouchable fund and then somehow the Congress got hold of it and started spending like a pimp with one day to live? (My point being, if there had been some foresight for tomorrow, we wouldn't be looking at the same terrifying numbers today.)

Social Security was in a seperate fund, yes - but I think if we hadn't touched it we'd still be looking at a complete collapse of the system, just another few decades later. The main problem is the population figures - people are living longer and we have less working people for every retired person then we had before. It was something like 20 working people for every retiree when it was created and it's down to six or four-to-one now.

The only solutions that will work is some sort of mix of privatization, cutting benefits, and raising the retirement age - but they don't call it the third rail of American politics for nothing.

I for one am angry that I'm paying into a system that I'll most likely never see.

Originally Posted by Rithrandil
Social Security was in a seperate fund, yes - but I think if we hadn't touched it we'd still be looking at a complete collapse of the system, just another few decades later. The main problem is the population figures - people are living longer and we have less working people for every retired person then we had before. It was something like 20 working people for every retiree when it was created and it's down to six or four-to-one now.

The only solutions that will work is some sort of mix of privatization, cutting benefits, and raising the retirement age - but they don't call it the third rail of American politics for nothing.

I for one am angry that I'm paying into a system that I'll most likely never see.

And I for one am angry that I paid for my parent's generation, most of whom retired at 62 with full bennies and paid very little into that same system. Don't give up hope though, I think something will be worked out for you young ones if you don't let the politicians blow it—I'd just be a little leery of putting it all into the stock market.

Oh, and population-wise—get those minorities working! They're having all kinds of babies and if you get the immigration stuff squared away, you'll be able to carry yourselves along with all us old useless baby boomers til we finally stroke out.

Edit: No disrespect to minority populations intended—just meant they have on average a higher birth rate and a lower integration into the work force.