Tuesday, March 31, 2009

The Tension Mounts and the World Yawns

Two days to go before the G20 and tension is mounting. Sarkozy is threatening to walk out if he doesn’t get his way, according to The Times. Nothing new there – his petulance and latent aggression shows every time he speaks. He is insisting on tough financial system regulation - something the G20 has already agreed to and which is likely the only major thing that will come out of this.

Obama is still pushing the need for more cash to be injected into the global system – both in terms of direct spending by Governments but also in terms of aid for struggling countries. He will fail in the first ambition, but the EU has already agreed to boost IMF funds (partly because several EU countries may need them). Angela Merkel will make sure that there are no spending commitments – no one can now really afford them.

Tax havens, which is not a massive issue, will dominate part of the seven hour meeting. In part this is because it is one of those things it is easy for socialists to talk about. In part because the G20 can agree on this, since not one of them is a tax haven (in fact, they are tax hells). Of course, the only people interested in tax havens actually at the meeting are the Russians, since most of the politburo use them. No tax haven countries will be there and the only way they can be outlawed is if all G20 nations enact similar and very complex tax laws. This will take for ever and have no bearing whatsoever on the current financial crisis.

Big spending on climate change adaptation will be put off to Copenhagen, and this is looking more and more problematic, as members of the US congress take a cold hard look at the $665 billion cap and trade scheme Obama has proposed and wonder what impact this will have on the very fragile US economy.

What will happen at the G20 is that reputations of the G20 leaders will decline. Gordon Brown, who billed this as a "last chance saloon kind of event", will look, well, silly. Obama will spin out of this and everyone else will look, well, silly.

Its only $35 million an hour folks. You get what you pay for.

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