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The G20 and ‘Balanced’ Trade

I have a column at the ABC’s Drum Unleashed arguing that the G20 is doing more harm than good:

The G20 is still saddled with the same mercantilist thinking that underpinned these earlier episodes of international policy coordination. That thinking mistakenly blames the global financial crisis on cross-border capital flows, rather than the role of America’s government-sponsored enterprises in misdirecting these capital flows. The Obama administration’s call for the G20 to set numerical targets for trade ‘imbalances’ would do more to threaten free trade and global economic growth than to sustain it.

Since the early 1990s, Australian policymakers have embraced the ‘capitalist acts between consenting adults’ view of current account imbalances, not least because Australia’s economic success has been built on the global trade in saving and investment that the Obama administration now wants to constrain through the G20.

More recently, however, Treasury has seemingly re-embraced mercantilist notions of ‘balanced’ trade. Treasurer Swan called the Obama administration’s proposal “constructive”. Yet the 4 per cent limit on current account imbalances proposed by US treasury secretary Geithner would condemn Australia to permanently slower economic growth and lower living standards.

 

posted on 15 November 2010 by skirchner in Economics, Financial Markets

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Comments

While I’m not about to defend the G20 (and I’m more than happy to admit the GSEs played a role in the GFC) surely China’s government-orchestrated under-consumption and over-production had a role to play?  Why is government intervention in the US economy the root of all evil, but much larger government intervention in the Chinese economy completely benign?

Posted by .(JavaScript must be enabled to view this email address)  on  11/16  at  12:39 PM


I don’t think it is completely benign, but it’s more a problem for them than for the rest of the world. Along with the rest of the G20, China needs to get its own house in order, but there is not much the G20 can do to facilitate that.

Posted by skirchner  on  11/16  at  11:39 PM


I disagree.  China’s interventions are hugely relevant for Australia, unless you think that this modest little uptick in commodities demand at the depths of global recession were somehow the result of the free functioning of the market.

Posted by .(JavaScript must be enabled to view this email address)  on  11/17  at  02:43 AM


You call that intervention, now <a href=“http://av.r.ftdata.co.uk/files/2010/11/China-credit-SocGen1.jpg”> is intervention!

I wonder if Ric “boom boom” Battellino looks at charts like this and thinks “Hmmmm, that looks like normal functioning of the free market to me”.

Posted by .(JavaScript must be enabled to view this email address)  on  11/19  at  08:43 PM


You call that intervention, now <a >this</a> is intervention!

I wonder if Ric “boom boom” Battellino looks at charts like this and thinks “Hmmmm, that looks like normal functioning of the free market to me”.

Posted by .(JavaScript must be enabled to view this email address)  on  11/19  at  09:21 PM


Arrrrgggghh!  I give up.

Posted by .(JavaScript must be enabled to view this email address)  on  11/19  at  09:59 PM



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