Message #162306

[Harconen]

            At the G20 summit Obama greets Brazilian President Luiz Inacio Lula da Silva, saying, “This is my man, right here. I love this guy.” The two-term socialist president, generally referred to as “Lula” in Brazil, had recently said that the world economic “…crisis was caused by the irrational behavior of white people with blue eyes, who thought they knew everything and now show they know nothing.” (The White House did not confirm whether Obama loves Lula because he is a socialist or because he is critical of blue-eyed white people.) [2175]

            The G20 economic summit meeting ends with little positive to show for the efforts of 20 governments other than a few official grandiose-sounding but essentially bland statements that something will be done soon to improve the world’s faltering economies. Obama backs off on key issues in order to make the meetings appear more successful than they were. He wanted Germany to implement a massive stimulus package of its own; it refused to do so. He wanted the European Union to bail out European banks while Germany wanted the IMF to do so; Germany got its way. He wanted a substantial troop commitment from Germany to assist in Afghanistan; he did not get it. The summit’s participants, all being in government and believing in it, generally refuse to accept that government is the cause of the global economic crisis and thus will return home to pursue additional deficit spending (which will lead to inflation as more currency is printed) and tighter regulations on business (which will lead to a slowdown of needed economic growth). None of the nations involved in the summit is likely to take the difficult but most reasonable approach: let the recession run its course, with losses for those who made bad investments and lessons learned by all. The summit does result in a commitment to give $1.1 trillion to the International Monetary Fund (IMF), without identifying the sources of the funding. (Perhaps as much as $250 billion of the $1.1 trillion will come from U.S. taxpayers. The worldwide recession destroyed as much as $50 trillion in capital in 2008; distributing $1.1 trillion to several third-world countries will do little to prompt a recovery.) One major success of the summit appeared to be an agreement to resist protectionist measures, but Obama’s own cap-and-trade proposal includes harsh penalties on goods from nations that do not also go along with his stop-global-warming schemes. It remains to be seen whether the G20 nations will in fact refrain from imposing trade restrictions. [2134, 2139, 2174]

            Arguably, Obama attended the G20 with hopes of getting some concessions but failed because he had nothing with which to bargain. He came across as pleasant and cooperative because he did not demand anything too forcefully. President Bush had occasional bad relations with the European Union mostly because he was prepared to confront them; Obama was more concerned with his image and thus did not overly pressure the other nations. Obama preferred a consensus of essentially nothing to criticism for demanding something, and, from the perspective of many, France’s Nicolas Sarkozy and Germany’s Angela Merkel departed the winners because they did not consent to be losers. [2207, 2412]

            Alarmingly, however, the G20 nations agreed to a Financial Stability Board (FSB) that would supposedly be an “early warning system” for future economic crises.  It would also “…extend regulation and oversight to all systemically important financial institutions, instruments and markets…” and “…endorse and implement tough new principles on paying compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms.” With his endorsement of the FSB, Obama essentially agreed to place American financial businesses under the control of standards set by the 19 other nations of the G20. Great Britain argued that the FSB favors Germany and France and left it at a disadvantage. The appeal of the FSB to Europe is that it will attempt to “level the international playing field” by burdening the United States with strict regulations and standards, reining in the American free enterprise system so that it cannot continue to outperform the sluggish economies of socialist Europe. (To socialists, “leveling the playing field” means reducing the productivity of the successful, not improving the productivity of the unsuccessful. In other words, the United States is to be punished for being successful, with the willing consent of Obama. He either does not realize that he is undermining and violating the U.S. Constitution by giving other nations the power to regulate the American financial industry, destroying it in the process—or he does not care.) [2195, 2224, 2244]

            The Senate passes Obama’s massive budget by a vote of 55 to 43. The House and Senate versions must be reconciled before Obama can sign the approximately $3.6 trillion budget, which has a deficit of at least $1.2 trillion—the largest deficit in the history of the world, and more than double the deficit of President Bush’s final budget. All Republican Senators vote against the budget, as well as Democrats Bayh of Indiana and Nelson of Nebraska. A full one-third of Obama’s first budget, $1.2 trillion out of $3.6 trillion, is deficit spending. [2142]

            While on the G20 and NATO trip, Obama and Prime Minister Gordon Brown are asked by BBC political editor Nick Robinson, “A question for you both, if I may. The prime minister has repeatedly blamed the United States of America for causing this crisis. France and Germany both blame Britain and America for causing this crisis. Who is right? And isn’t the debate about that at the heart of the debate about what to do now?” Brown turns and forces the question on Obama who, lacking his teleprompter, responds, “I, I, would say that, er… pause …if you look at… pause …the, the sources of this crisis… pause …the United States certainly has some accounting to do with respect to… pause …a regulatory system that was inadequate to the massive changes that have taken place in the global financial system… pause …I think what is also true is that… pause …here in Great Britain … pause …here in continental Europe… pause …around the world. We were seeing the same mismatch between the regulatory regimes that were in place and er… pause …the highly integrated, er, global capital markets that have emerged… pause …So at this point, I’m less interested in… pause …identifying blame than fixing the problem. I think we’ve taken some very aggressive steps in the United States to do so, not just responding to the immediate crisis, ensuring banks are adequately capitalized, er, dealing with the enormous, er… pause …drop-off in demand and contraction that has taken place. More importantly, for the long term, making sure that we’ve got a set of, er, er, regulations that are up to the task, er, and that includes, er, a number that will be discussed at this summit. I think there’s a lot of convergence between all the parties involved about the need, for example, to focus not on the legal form that a particular financial product takes or the institution it emerges from, but rather what’s the risk involved, what’s the function of this product and how do we regulate that adequately, much more effective coordination, er, between countries so we can, er, anticipate the risks that are involved there. Dealing with the, er, problem of derivatives markets, making sure we have set up systems, er, that can reduce some of the risks there. So, I actually think… pause …there’s enormous consensus that has emerged in terms of what we need to do now and, er… pause …I’m a great believer in looking forwards than looking backwards.” [2155]