G-20 Worries About Everything But What It Should

Courtesy of Reuters

By Greg Hunter’s USAWatchdog.com

The G-20 kicked off in Seoul South Korea this week.  It seems to me everyone should be talking about the U.S. defaulting on its obligations by massive money printing.  Instead, the group of twenty finance ministers and central bankers from the most important industrialized and developing economies of the world has been sidetracked.  There is the threat of a North Korean attack on South Korea.  The Guardian UK reports, The British delegation is taking seriously the potential threat of an attack on the G20 summit by North Korea, whose border is just 50 miles away from the gathering in Seoul.  A diplomat said: “There has been speculation that the North Koreans will attempt some kind of disruptive incursion into South Korea.” (Click here for the complete Guardian UK story.)

Then, there is the latest PIIGS (Portugal, Italy, Ireland, Greece and Spain) problem that has popped up.  It seems Ireland has the Group preoccupied with another bailout in the EU.  Reuters reports, Ireland’s issues have moved to the forefront of currency concerns recently after taking a backseat to U.S. Federal Reserve policy for several weeks. Yields on 10-year Irish bonds rose well above 8 percent to a record high over comparable German debt, the euro zone’s standard.  Investors are worried Ireland would not be able to cut spending as planned and may require a bailout, with bond holders forced to absorb losses.” (Click here for the complete Reuters story.)

There is also talk of a looming trade war among the G-20.  The Associated Press reports, “A dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression. The biggest fear is that trade barriers will send the global economy back into recession.  Hopes had been high that the Group of 20, which includes wealthy nations like Germany and the U.S. and rising giants like China, could be a forum to forge a lasting global economic recovery. Yet so far, G-20 countries haven’t agreed on an agenda, let alone solutions to the problems that divide them.” (Click here to read the complete AP story.)

Yes, a trade war could do great damage but, to me, that should take a back seat to what the Federal Reserve is doing by starting another round of quantitative easing (QE2).  The Fed is printing up a fresh $600 billion (for starters) and is on its way to turning the dollar into candy wrappers and toilet paper.  This is the currency that most of the world uses for international trade.  I cannot believe this is not the first item on the agenda of the top financial officials in the world!

The U.S. is effectively going into bankruptcy.   John Allison, former CEO of America’s tenth largest bank, BB&T, said recently it is a “mathematical certainty” that the United States government will go bankrupt unless it dramatically changes its fiscal direction, according to CNSNews.com.  The story goes on to report, “Now, countries don’t go bankrupt the way companies do,” said Allison. “They don’t file bankruptcy. They usually hyper-inflate. They print a bunch of paper money, or they become Third World economies like Argentina–unless we change direction.”  (Click here for the entire CNSNews.com report.)

The world is already changing direction and getting out of dollars and into gold, silver, oil, agricultural and other commodities.  The world is buying “things” and shunning the dollar.  It has been a slow process but is now picking up speed because of QE2.

Meanwhile, the direction the U.S. is heading points clearly to printing money out of thin air to paper over severe economic problems.  The Fed is hoping QE2 will get things back to “normal,” but what it is doing is not repairing the damaged economy.  In his latest report,  economist John Williams of shadowstats.com says, “. . . the Federal Reserve not only has begun a process from which it will be increasingly difficult to withdraw, but also has begun a process that likely will have to be accelerated in the months ahead, in response to mounting U.S. fiscal and systemic-solvency problems intensified by a still-unexpected “double-dip” recession, as well as in response to intensifying selling and dumping of the U.S. dollar and dollar-denominated paper assets in the global markets.  Such locks-in one of the underlying prerequisites for the U.S. economic environment to evolve into an unthinkable hyperinflationary great depression.”

Most do not realize things will not get back to the way they were.  There is a “new normal.” Americans will have to get used to much higher inflation (at the very least) and a much lower standard of living.  It has been reported the G-20 will announce something being called a “great leap forward.” It is a plan to sustain growth in poorer countries.  That’s just great for impoverished nations, but nothing is being done to stop America’s financial slide into poverty.  Maybe that is what the G-20 really wants.

Comments
  1. Joshua Gamen

    if everyones checking, saving, and retirement accounts(which have already been depleted since they dont have no damn jobs) suffer from the money losing it’s value, that’s ok as long as we can continue to export our cows and american cars

    http://joshuagamen.wordpress.com/2010/11/12/will-the-dollar-continue-to-decline-or-does-the-g20-know-magic/

  2. Art Barnes

    Yes, Greg, your closing comment is exactly right …”Maybe that is what G-20 really wants.” For decades now the “other” countries have been trying to destroy the dollar (and the American economy) for the sake of their upward travel from third world status. Seems like they can’t figure it out that it would be better for every nation to advance upward instead of only the big ones down for the sake of the little ones. In order words, expand the pie overall for all instead of just cutting bigger slices in the same size pie for the impoverished nations. Regarding the quote of USN.com about hyper-inflation or a Brazil like status, I believe the Fed. and our Government is betting on (and wanting) the Brazil like experience for our future. In that model the government sutains its power, the few important ones are extremely wealthy, and all the other little poor ones get enough food for each day to sustain their lives without the necessity of having to march (revolt) on the fat cats of their country. Hyper-inflation, on the other hand, would cause enough instant trouble that the government would have to do something quickly such as martial law, etc. and they can’t predict the outcome of such actions in their “think tanks”, therefore, they favor the Brazil model; which is predicable. Greg, can’t you see we are, in fact, allready in the Brazil model, abeit, walking towards it for now, but soon we will be running. Thanks for your blog.

    • Greg

      Art,
      Thank you for your support.
      Greg

  3. nm

    Greg:

    Just saw this article in the NYT about “The Enduring Myth of Gold”. I am becoming astounded by the New York Times Business and Economic reporting lately.

    http://www.nytimes.com/2010/11/10/business/economy/10leonhardt.html?src=me&ref=business

    • Greg

      nm,
      The NYT is so biased and unfair it is not even funny. No one is ever allowed to rebut Paul Krugman and people like him. This is a disservice to NYT readers. Thank you for the comment and link.
      Greg

  4. Johan

    Hey Greg,
    I’m a frequent reader of yours. Just wanted to encourage you to keep up the good work! Nice to see that some journalists are taking their jobs seriously!

    Cheers
    Johan, Sweden

    • Greg

      Thank you Johan for your support and kind words. You make me feel I am doing something important.
      Greg

  5. cowboy

    Of course the G-20 wants to see the the USA slide into poverty since that means we will have higher unemployment as a result of our wages being to high to compete with those in poorer countries. In a world that has just the USA letting any and nearly all countries export whatever they want to us while all the other countries have many, many barriers to keep our products from interring their countries, the middle and lower classes incomes will adjust to the lowest level. Just what big business wants and they do control our government !

    • Greg

      Thank you Cowboy for the pithy comment.
      Greg

  6. Bob

    Has gold hit the point were nobody can afford it? Have the the insiders who have looted this country getting scared of China and looking for a safe place? China will cut the bal-s off of the bankers and sale them on the free market. Peace

    • Greg

      Well said Bob.
      Greg

  7. Sean S

    It’s very doubtful that any G20 member seriously wants to see any major economy(or minor one for that matter) slide into a financial abyss and poverty, least of all the USA. It’s clearly not a positive for sustained global economic growth or stability.

    The major economic and financial problems of the USA today are quite clearly of its own making and the solutions have to come primarily from Government and Federal Reserve actions – not from the international community. There is no end of comment on what the USA needs to do and what errors it is making.

    The long list of primary causes of the current mess are glaringly obvious and well documented – and they are all domestic. The shortcomings of the solutions being adopted by the authorities should also be apparent to all. Indeed some of those erroneous solutions will have negative consequences for the global economy.

    There is only one country’s actions that is deflating the value of the USD and that is very clearly the USA. There have been encyclopedias of material written about this already. As long as the FED continues to signal that it will adopt further Quantitative Easing and like policies, and as long as the US Government continues to expand it’s already grossly excessive debt, the USD will be sold off. Bottom line – no one wants to be caught holding a significantly depreciating currency so those that can will get out of it.

    I will bet on one thing. Some politicians, wanting to throw off public anger at their lack of effective action (because, inter alia, that means some tough and unpopular reforms on spending) will be spinning xenophobic stories to a gullible electorate that Americas problems are largely the making of foreigners.

    If you say it often enough some people will believe anything.

    Meanwhile, back in the real world……………………

    • Greg

      Sean S.
      You are spot on that the financial problems the country faces are of our making. They are so big I don’t see how anyone can say it’s someone else’s fault. Thank you for the comment.
      Greg

      • MarkM

        Hey Greg,

        Thanks for getting back on track with your topics. I was a little tired of the “banks are evil” theme. Banks and Wall Street robber barons will do what social engineers in gubmint allow.

        Our gubmint is the problem.

        markm

    • MarkM

      Hello Sean S,

      Great Job! Your post is right-on!

      Thanks,
      markm

      • Greg

        MarkM,
        Thank you for coming back to comment.
        Greg

  8. Robert

    Let’s face it. This country is being dismantled like an old battleship. In the new economy, where the large trans-nationals are our new government authorities, nation status doesn’t matter anymore.

    We as citizens continually have our patriotism challenged when we disagree with the direction that the political parties are taking our nation. But what’s not being challenged is that corporations don’t believe in nation status. They’re trans-nationals. By default, they have no allegiance to nation status or state boundaries. But were continually propagandized to believe we are the greatest country in the world. Maybe yesterday we were, but what made us great was our industrial advantage, access to cheap resources, our ingenuity and sense that anything was possible. Do we have those 4 ingredients now? Isn’t what’s bugging most of us is the uncertain and unfunded future direction our country is heading toward? How did that happen?

    Think about it. And who is sending those advantages offshore? All the while we as citizens are kept in a constant state of fear and panic that somehow our neighbor or the person of color is the enemy and its all because of them and if they just believed like the other side does, all would be great and our problems solved.

    The problem is our wage levels outgrew our ability to compete in this new global economy. For America to compete, who of you would be the first to say, “I’ll take a pay cut so we can compete in the new border-less economy that the large trans-nationals are taking us into.” Well, nobody stepped up to that option, so the corps took their enterprises to who would and in the meanwhile, the people here in America were left to blame each other and in particular, the unions for their departure. Fully well forgetting why unions were created in the first place. Because workers were taken advantage of and unions represented in the beginning, a more fair workplace environment. (To listen to some politicians, they say its over-regulation and high taxes that drove away big business but its not that complex. It was wages and benefits that could be found cheaper in developing nations that attracted them. The tax issues can be over-ridden by accountants but it sells well to an uninformed public that only knows they are making less money, have less opportunity but still have a tax obligation every April 15th).

    This dismantling of America is about power, money and profit and the portability of those entities that wield those motives. Big business looked around and said, this workforce is being paid too much and that’s cutting into our profitability. We need to do something about that. They did and at the biggest expense to the once upwardly mobile middle class.

    Do you think for a moment the corporations off-shoring the jobs that made our country great care about the plight of the citizens that made them what they became? Hell no.. All they care about is power, money and profit. That’s why corporations exists and by mandate they must think about their shareholders and creating shareholder value before anything else.

    Ross Perot was right. Hear that big sucking sound he said was coming? Well, its here. Next time we get a candidate like Perot, I hope we listen to him/her. I suspect Micheal Bloomberg may be the next Ross Perot candidate.

  9. zino

    Is this Global Financial Crisis Could Lead to World War III??? God save our souls, and that is if God does really exist

    • Greg

      Zino,
      There is a God. Energy cannot come from nothing and cannot go to nothing. There is a God and he is watching over us all.
      Greg

  10. Art Barnes

    Reply to Sean S. Sean, I agree with you and Greg that the economic mess that the U.S. is in is of its own making; your reply was spot on. However, frankly, don’t ever think for a moment that some other countries, including some in the G20, would not like to destablize this country. To think otherwise is very foolish. Many countries would like to punish us for our success and have been trying to do so for decades, the next one will be China, just wait and see! When China gets clearly on top economically, that power will be felt world wide, especially here in U.S. where China will commence deciding unilaterally that perhaps now is the time to take over Taiwan, etc. knowing we lack the power to stop it. Thank you all for your comments, this great county still has a few thinking people in it and I am thankful for that.

  11. lostinmissouri

    Maybe a little off topic, but my question is: Who was the last President of the USA, to say something like “America first, and Americans first”?

    Yes, our problems are home made, but they exist, because we have for some time now, slanted the table toward the rest of the world, and not toward America.

    It is past the time, to level the playing field, and put our interest first again….imho

    • Greg

      Lostinmissouri,
      Bravo.
      Greg

  12. Jay

    Is QE just traditional Open Market Operations? Or is the Fed doing something different? To those who believe that this will cause inflation, why do they think the M1,M2 (just under 10 trillion, I think) is too high?

  13. Jan

    We can blame the unions, we can blame the corporations, we can blame the politicians, but we need to look in the mirror too. Who wasn’t happy when their 401 K was gaining each month? Who wasn’t shopping for the best deal on a TV, appliance, computer or video game not thinking of the lost American jobs that got us the low, low prices?

    The question now it what are “we” going to do about this mess? Wait for the politicians, bankers and corporations to save the day? Our dollars and and how and if we choose to spend them are capable of sending a very strong message to the powers who seek to control us. We can choose to no longer buy into the big game. We can park our savings in a small local bank or credit union. We can seek out American made products and skip the big corporate brands now made overseas. We may pay a bit more, but knowing we are supporting the American economy and American jobs is worth the price.

    The Roaring 90′s are over, I get the sense that people no longer feel borrowing money and buying stuff is necessary to live a good life. QE2 is doomed to failure, the American culture has changed dramatically and there is no going back to those free spending days.

    • Greg

      Thank you Jan.
      Greg

  14. UKguy

    It was in the early ’80s that China began to look westwards and examine it in detail.

    They witnessed the BCCI details, originating in Langley and involving the then current Administration at the highest levels in the US, and at the highest levels in the UK, both deeply entwined in the Arab world, with structures already labelled, and soon to be labelled, “terrorist”. The relationships built at personal levels among the senior operatives exist today. Upon its dissolution in the UK by the BofE, after many warnings from the UK secret services, the BofE spent dozens 0f £millions on legal defences against cases brought by legitimate depositors effectively screwed by the BofE closure….such defences costs naturally falling on the UK taxpayer.

    The Chinese were amazed at the ease at which financial corruption took root and flourished.

    During the ’90s China began expansion, aided by a US public eager for cheaper goods, and a corporate/financial argument that became a mantra of increased profit, and thus trickle down, that would ultimately benefit the entire US populace.

    Chinese spies ran free during the Clinton era, from silicon valley, to NASA, aided by massive Chinese contributions to the Clinton election funds. At this time China, at US prompting, entered and was accepted by the WTO, essentially a Wall Street construct, and was granted Most Favoured Nation Status by the US.

    This set the seal on more US, indeed global investment in Chinese production facilities. However, China never obeyed all the rewuirements of the WTO, particularly in respect of opening up financial markets on home territories.

    In retrospect this can be seen as the method to be used by China to gradually erode the power of the US global hegemony created by the use of the $ as the world reserve currency.

    Had China fully opened her financial markets to western entities in accordance with WTO demands, she would by now have become a mere adjunct to western global financial manipulation, using derivatives, interest rate swaps, currency swaps, and all the other weapons of financial mass destruction created by her masters on Wall Street. She would have become a servant of the Fed. That was the Clinton Administrations intent!

    The Mercantilist approach by China, to erode western financial power, is the reply to western military supremecy, which she could not overcome. The easy way was through the western soft (relatively) underbelly of finance.

    We now have the situation where several regional currencies are embrionic, and global discussions abound. Bi-lateral agreements on finance, currencies, commodities, etc are forming that in future will involve global trade without the use of the US$ for financial intermediation. This will introduce the US nation to economic reality, ie, – that absent oil and most other commodity trades requiring US$ intermediation, the reserve status is lost, and the $ will sink in international purchasing power. The Fed is currently monetizing US gov’t debt, – - politicians will eventually realize that absent the reserve status, the nation is unable to fund the military, with its constant warmongering and C.1000 bases around the globe.

    For many years, the Fed, and the BofJ, have been the centres of global inflation, via insane money printing, hidden from their populations via fraudulent gov’t statistics. It must be understood that in a purely fiat currency, all “business cycles” are by design, and are created to enrich the creators of such.

    Emerging nations are seeking, and must seek, ways to insulate themselves from these inflationary machines, thus restricting inflation and its destructive powers to western nations. The Mantra of “deficits don’t matter” is failing!

    The same banks and banking families that financed the Bolshevics, Hitler, USSR, and Mao, financed the Chinese expansion, but China did not make the mistake of fully opening the financial doors.

    Last week, the financial markets were instructive.

    Two of the remaining few pillars supporting what remains of western financial hegemony, were on the point of collapse, – attention thus had to be focused elswhere. Although Ireland does not need access to financial markets for finance untill 2011, suddenly the media were focussed on Irish debt and the possible default. Germany and the EU made conflicting statements to add to the confusion, and spreads between Irish and German debt widened considerably.

    On the other side of the world, Goldman advised its client to exit certain positions in SE Asia, citing inflation worries, and also put out a statement that CPI in China was approaching 4%, and anticipating Bank of China upcoming rate increases and monetary tightening.

    Interestingly, Chinese CPI includes foodstuffs, unlike western nations CPI that excludes foodstuffs in order to mislead the population inflation expectations. Given that, we can say that Chinese inflation is benign compared to western nations “real” inflation levels.

    The western devaluations under the Plaza Accords, arranged by the BIS, screwed Japan. China knows this, hence the peg.

    Together, the Irish and Chinese news was enough to create a change in Wall Street and hedgy algo trading, to take down the entire commodity complex, without exception….thus giving JPM and HSBC assistance in the PM arena, and temporarily negating the ongoing short squeeze.

    This downturn despite the bond sales earlier in the week creating POMO ramping activity possibility for friday.

    When financial masters of the universe resort to these activities, we know the end is near. These are the facts, this is the history, that the G20 will not discuss. Animosity runs too high.

    The mere 6% shift in IMF voting rights, and currency basket, that might happen in 2 years if discussions proceed smoothly, do not remotely speak to emerging nation ambitions, or the reality of the economic situation. Absent logic in this area, there will be no G20 agreement. That is something else that will not officially be discussed.

    Greg, please note that since this is mostly a US blog, I restrict comments to US related facts. This does not mean that I do not hold the UK gov’t, and financial position, in great alarm and disgust

    Many thanks for the use of your blog space.

    • Greg

      UKguy,
      Come back anytime. This is great content!!
      Greg

  15. Kasara

    It’s much easier to unedrsntad when you put it that way!

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