Much Ado About Almost Nothing

The Mother of All Economic Summits held this week in Pittsburgh evokes faded images of similar conclaves in the 1930s. The grainy footage from those times showed somberly dressed men with severe expressions carved on their faces. They walked stiffly from vintage limousines to the imposing façade of some temple of finance. They returned looking even grimmer. Today, things are done with more pizzazz. Colorful ties, a parade of fashionable spouses, and big grins all around -- as if the American hosts had passed around gilded cards with the embossed message: "Look upbeat and keep a positive attitude." So they assembled cheerfully in the rotunda of the Phipps Conservatory beneath the lofty glass dome.

The cacti that normally surround the rotunda were removed. Pity. By some divine intervention, they might have pricked the conscience of the assembled statesmen -- or some other part of their anatomy that could have jump-started the palaver.

As it was, the heads of government were so exuberant in their self congratulations that they nearly O.D.ed on huge helpings of green shoots. A throwback to the 'survivors parties' the British once held in Calcutta after the monsoon season passed. All this celebration while the global economy they so badly mismanaged is still hospitalized. At the very least, Nicolas Sarkozy's glamorous wife, the chanteuse Carla Bruni, could have composed and sang the debut performance of a Rehabilitation Blues.

The scorecard for the Summit is extremely thin. It is easily summarized. Here are the highlights:

1. Most banks but not other financial institutions will be required to increase their capital. Specifics are left to a Working Committee. Monitoring and enforcement is left to the national governments.


2. Bank salaries and bonuses are to be restricted and made to conform to performance over a three year period. Specifics are left to a Working Committee. Monitoring and enforcement is left to the national governments. These prospective rules will not come into force until 2013, i.e. when the hunting season for 2012 campaign contributions is over. Also note the strong incentives for executives to grab as much as they can in the next four years -- thereby adding to the risk of another crash (assuming that they're truly worried -- a highly dubious assumption).


3. Leaders agreed to work to reduce the structural imbalance between those countries that have large balance of trade surpluses and rely heavily on export trade (e.g. China, Germany) and those who have large, chronic deficits and consume too much, i.e. the United States. Specifics are left to a set of Working Committees and the goodwill of the governments involved.


4. Some adjustments will be made in the voting quotas of the IMF to give greater weight to BRIC nations. The U.S. retains its veto.


5. The G-20 will replace the G-8 as the primary body for global economic kibbutzing. It will meet annually instead of bi-annually. Makes sense; as Simon Johnson remarked, "doing two summits a year -- when you don't have anything to report on -- is embarrassing."

That's it, folks -- there ain't no more. Regulation of CDOs, CDSs, over leveraging, too big to fail financial institutions, etc never made it onto the agenda. The blood oaths of November and April to tackle head-on the practices that brought us to the brink of disaster evidently are gone with the wind.

The real drama of the Summit was Obama's before dinner delivery of the 'breaking news' that a new Iranian nuclear fuel facility had been discovered. In fact, the United States has known of its existence for months, conserving the information for the moment -- and audience -- when it could have maximum impact. The exquisite timing had the further benefit of distracting attention from Pittsburgh's historic non-event -- not to mention Obama's own abject failure on Palestine when Netanyahu stiffed him at the U.N.

 

 

Comments

[AnnfromCA]

Well, at least compensation was discussed. The excessive compensatory rewards for having nearly plunged the world into an extraordinary global financial crash will not be forgotten.

[Rescisco]

Never underestimate the inclination of governments to avoid timely and responsible action. Never overestimate the ability of governments to do so.

[Hoelder]

I might add that we are stuck with the bill of the so called bailout. I wonder what would have happened if there was no money. The too big to fail makes as much sense as flying pig. It would have been a wonderful opportunity to break up the monsters into manageable sizes. I don't think it as bad. It is not just endless greed but also the assurance that the right government will protect the banker talents from job loss. If we apply for this program, we are just like the beggars on the side of the road that are looked upon as the people that will just buy liquor if they give them a buck or two, so they don't. Since the welfare moms were cut out of government so they are not tempted to churn out babies to live on the welfare checks. If you or me fail in business or family, nada no help, but if mister $4000 suit he gets billions and a re-tension bonus.

[02bmw76]

The collusive corruption continues unabated...

[lastams]

What was "in the wind" this weekend was teargas on the campus of a Pittsburg University
when riot police attacked students who were doing nothing more than hanging out on campus.
I don't know which is worse; that the G-20 consider themselves to be a nation unto themselves'
with their own security forces and unrestricted unlawful rules of engagement,
or that no major news source, including this post, thought it sufficiently relevant to mention.

[Ascoli]

It's all a farce.

[noesis]

Onward to blo.wing up the next great speculative bubble.

[politicky]

Of course they're grinning, market volatility means the ones doing well are doing quite well. As for the rest of us, d'ya really think they care?

[ElkoJohn]

Mr. Brenner,
I like your report on the G-20, short and to the point.
Looks like Iran is in hot water with Team Obama.

[josephXY]

It's not just politics and the bankers that are essential in all that. Underrated to a great deal is
the failure of the media, their lousy service. Without those experts / pundits the crisis would never
have come that far and been dragged on and on. For a look back at those awfully wrong forecasting
experts, one fine example:
http://www.youtube.com/watch?v=2I0QN-FYkpw

It's only now that those "media maxed" are saving themselves also a lot of financial problems.

[bioluminescence]

Laissez fair capitalism, by definition, has no external control. The trouble is, when it gets fundamentally out of control, as it has now, there's no way to get it back on track. Because there is no track to get back on. So the only thing for the PIttsburgh G20 to decide on is what to order for dinner. After the G20 summit, they can get back to their real jobs: throwing public money into private black holes hoping that everything will get better. In the meantime, the UN predicts that global unemployment will reach 220 million by the end of the year, 20 per cent of the world's workforce.

[phlashba]

And the band played on..........

[PhilipTaylor]

SUMMARY:

Aside: Usurped Meeting by bringing off the back burner, the issues of 1RAN!

Nothing goes into force until 2013 after the hunting season for 2012 campaign contributions is over.

Most banks, except B1G 0nes and 1nsurers, will be required to increase their capital by 2013.

Bank salaries and bonuses are to be restricted and made to conform to performance over a three year period. Committee to decide! BS Monitoring and enforcement is left to the national governments.

BRINGS ABOUT Strong incentives for executives to SKIM as much as they can in the next four years adding to the risk of another crash as they suck the Life out of Stakeholders and Americans!

Leaders agreed to work on Rebalancing trade Exports and Deficits but specifics left to Committees and goodwill of governments.

Simon Johnson remarked, "doing two summits a year when you don't have anything to report on is embarrassing." Solution = Once per year!

[sposton]

You forgot one thing. Police agencies got a lot of practice how to control protesting crowds; we've seen inter agencies fatigued tactical goons whisking away protesters. Surely this skill will come handy in the future as we are assured to have more street protests and civil unrests.

[pedernales]

When you don't have a place to live or you're starving things get pretty simple. At this time, some of our policemen-citizens might begin looking beyond their "job" and take themselves more seriously as citizens. You're supposed to protect and serve yet always end up busting heads for fascists.

[sposton]

"Law" is always on oppressors' side. Our history is full of examples. It is too bad Americans don't learn the real history in their schools.

[virtual0]

There is that magic number again, 2013!!!

"Monitoring and enforcement is left to the national governments. These prospective rules will not come into force until 2013, i.e. when the hunting season for 2012 campaign contributions is over. Also note the strong incentives for executives to grab as much as they can in the next four years..."

Same year that Obama's fabled healthcare "reform" starts to kick in... Also note the strong incentives for politicians/presidential candidates to grab as much as they can in the next four years...

[Cosatjockomo]

Doesn't matter, end days come in 2012. Obama who exactly fits the profile of what has been foretold as the final anti-christ (eastern education, face of an angel, champion of peace, ride to power on immense popularity) will have shown his true colors by then. Mayan calandar, white buffalo, pyramid allignment, man with the power of creation, these are not subjective markers of time, they are definate markers that could only apply to now, derrived from cultures all across the globe. Global warming is unleashing the four horseman, water will become as valuable as gold once the glaciers around populated areas have meltted away. I can't wait!