Another G-20 Meeting

I am a big fan of the BBC's Paul Mason. I find his pieces often insightful and accurate.

The piece that motivates me today is no different. But this piece hit home in a very striking manner.

The G-20, as the readers know, is the group of 20 "Finance Ministers and Central Bank Governors" of the twenty largest industrialized and developing national economies, including Australia.

Well, Mason quotes paragraph 10 of the "G-20 Leaders' Statement", Pittsburgh Summit (USA), September 25, 2009:

"10. We pledge today to sustain our strong policy response until a durable recovery is secured. We will act to ensure that when growth returns, jobs do too. We will avoid any premature withdrawal of stimulus. At the same time, we will prepare our exit strategies and, when the time is right, withdraw our extraordinary policy support in a cooperative and coordinated way, maintaining our commitment to fiscal responsibility." (Emphasis added. See here)

And this is what Mason says:

"This is what did not happen. Fiscal expansion turned to fiscal crisis all across southern Europe; the ECB raised interest rates in the face of depression gathering at its periphery. The US legislature used a technical vote to cause a fiscal crisis, removing the country's AAA rating and convincing markets that no further fiscal expansion is possible. (...) The issue, all along the line, is economic orthodoxy. The world's leaders chose to split the difference between the anti-Depression policies of nationalisation, breaking up the banks, running huge fiscal deficits and printing money - with a half hearted version of each of these measures." (Emphasis added)

Why should this strike home? Well, because less than two weeks later, precisely on October 6, 2009, the RBA announced its first official interest rate hike (out of 7 since then): from 3.00 to 3.25%. After this signal was given, the Opposition started pressing the Labor Government to withdraw the fiscal stimulus, and the Federal Government indulged. In this, to be fair, politicians were greatly aided by the local media, mainstream and alternative alike.

This is how Mason concludes:

"My experiences in Greece this week convince me that populations will not long stand for chaos, misery and psychological torture inflicted by news media delivering constant bipolar messages of despair and hope.
"Switzerland, Japan and effectively the United States are already carrying out nation-centric currency policies; ditto Brazil - and China is a perennial currency manipulator. Once we're done manipulating currencies the next phase is trade war."