Things aren’t looking good again. We keep hearing about the global economic crisis but were hoping that the recovery from it was well underway. Unfortunately, when looking at the stats, this doesn’t seem to be the case. Oil prices are increasing, sovereign debt burdens are becoming unsustainable and along with lack of certainty vis-à-vis the future of Japan. These issues will be on the table at today’s meeting of the Group of Seven members. Political ramifications will also be discussed such as mid-east unrest. The plan is to develop a “more stable global economy less prone to the booms and busts that have marketed the last two decades,” according to a Reuters report.
Japan Not Jesting
Japan is definitely having a hard time and their recovery is going to have an impact on that of the world economy. Its own outlook seems very unclear right now according to deputy managing director of the IMF, Naoyuki Shinohara. No one knows exactly what is going to transpire at this meeting and news is expected after Friday but there may be some information from US Treasury Secretary Timothy Geither and French Finance Minister Christine Lagarde. This year’s G20 will be chaired by France.
The G20 is the main forum now for attempting to ensure that there will not be a repeat of the 2007-9 financial crisis “which triggered the worst global recession since World War Two.” The agreement by G20 leaders two years ago was to reduce the inconsistencies “between export-rich countries” like China “and debt-burdened consumer economies including the United States.” However today, many economists blame this for worsening the crisis.
The G20 is still having problems though. Even though there has been significant recovery in the global economy, it has not been so successful in coming to an agreement on how to manage these issues. It is anticipated that leaders in the finance world will be working on developing “indicative guidelines” as a way to identify any potential trouble areas but finding those countries that are not sticking to the rules (such as America and China and possibly even Germany and Britain) will take somewhat longer.
IMF and G20
The IMF is about to meet up. It meets up twice a year and at this meeting it looks like it will be warning the G20 not to become “too complacent” just because it looks like the worst of the financial crisis is over. Of course it will be tougher for the IMF to negotiate with the G20 at this point, when they are not in crisis mode according to the IMF’s chief economist Olivier Blanchard.
The IMF is always seeking to “reduce government debt in advanced economies,” but it might be tough for America to slash its deficit by 50 percent over the next two years which is what the G20 wants it to do. But apparently this isn’t such an unrealistic expectation since America’s Treasury claimed Washington will be able to “meet its commitment.” In addition, Obama yesterday put forward his plan to reduce the deficit in the next decade by $4 trillion. One of the things he said was that since the very wealthy have not had tax increases in the last fifty years, making them pay more now will ultimately benefit other members of society.
There is still work to be done vis-à-vis the global economic crisis but things are generally improving. However, this does not give western countries the green light to rest on their laurels as there is still significant work ahead and changes to be enforced.