G20 FTW

The G20 Summit has wrapped up with a final communiqué (French? I knew it!). Kevin Drum sees little change from the draft communiqué. Basically, the big news is $1.1 trillion dollars in guarantees to the IMF and the World Bank standing in for global stimulus, as well as a load of new regulations of the global financial system.

The Group of 20 also agreed on new global rules to cap the pay and bonuses of bankers, as well as a common approach to dealing with the toxic assets on the balance sheets of the world’s banks. That is an issue that has bedeviled the Obama administration and other governments [...]

A financial stability board with enhanced authorities will also be created to provide an early warning mechanism to alert nations of systemic risks to the international economy, the communiqué said.

“Together these steps give us confidence that world economy can return to trend growth,” Mr. Brown said.

The announcements came after negotiators from the United States and Europe worked frantically to hash out an agreement on new regulations, a day after France and Germany signaled a rift over the level of scrutiny that regulators should have over hedge funds and other global financial institutions.

While the United States was determined to resist European efforts to create regulatory authorities with crossborder authority, officials said the two sides worked out policies on transparency and early risk warnings for banks that would placate France and Germany.

“There’s not going to be a ceding of sovereignty to a global regulator,” said a White House official, who spoke on condition of anonymity because the negotiations were confidential.

France other Europeans countries also pressed China to accept action against tax havens, a step it has resisted because of the possible consequences for its coastal banking centers, Hong Kong and Macao.

“I think we’re going to see an agreement,” said Stephen Timms, the financial secretary to the Treasury. “I am expecting sanctions against tax havens. We want that pressure to be maintained.”

There's also some namby-pamby language about "naming and shaming" countries that erect trade barriers, but the truth is that every developed country does it, and the playing field is never level.

I actually do appreciate this statement from the President, signaling that the US cannot carry the consumption growth of the global economy any more.

Such resistance may not have mattered as much in the past. In previous downturns -- including the Asian crisis in the late 1990s -- the United States was by and large the driving force of global recoveries. But in the wake of the current crisis, Obama said, Washington will have to deal with "our long-term fiscal position" and the notoriously low consumer savings rates that for years drove Americans further into debt even as U.S. imports soared.

This time, he said, the rest of the world cannot depend on the "United States being a voracious consumer market."

"Those are all issues that we have to deal with internally, which means that if there's going to be renewed growth, it cannot just be the United States as the engine," he said during a news conference with British Prime Minister Gordon Brown. "Everybody is going to have to pick up the pace."

For too long we have used cheap credit and a culture of consumption to drive growth, and that's just not sustainable any more. Our citizens are drowning in debt and can't buy all of China's crap. I don't want to see a zero-growth economy - with population growth you consign large chunks of the world to endless poverty and starvation - but the burden must be shared and the go-go consumption just has to end.