The recent G20 meeting in Ankara concluded this last week.
Christine Laguarde, head of the IMF, issued the following press release: Lagarde Urges More Global Action to Support Growth and Jobs. This is a useful looking press release to signal global visibility on the the real econimic issues. The IMF highlights:
- Growth remains weak and low
- Uncertainty is present, even increasing
The press release concludes: “A concerted policy effort is needed to address these challenges, including continued accommodative monetary policy in advanced economies; growth-friendly fiscal policies; and structural reforms to boost potential output and productivity.”
Yes indeed. However “concerted” falls short of the real need. I would have said, “collaborative, coordinated” policy. CNBC posted an article covering the conclusion and output from the G20 meeting. In, “G-20: Ultra-low rates no longer enough to boost global growth” Christine Laguarde is quoted as saying, “We will carefully calibrate and clearly communicate our actions, especially against the backdrop of major monetary and other policy decisions, to minimise negative spillovers, mitigate uncertainty and promote transparency.” Sorry, this is not enough even it this were achieved. There is little to no coordination or collaboration. There are meetings but no real, effective, actionable collaboration.
Each sovereign state takes action to favor their own position and signs are that this behavior is increasingly prevalent. Currency wars were exposed this last week. The FT reported how, on the heels of Chinese fun and games with the yuan, other competitive currency devaluations in Asia are underway but expected export improvements have not followed. So that weapon is proving troublesome. Now we wait the Fed’s decision for US interest rates. Will they take the bait and push rates up for the first time since 2007, or respect the wider global scenario and wait a little longer? I looked at the major issues earlier. My guess is the Fed will lean ever so slightly for, “yes” when in fact I think they should avoid raising rates. For me, productivity, capital investment, and wage growth are three factors still out of whack. If wage growth stepped up, and capital investment, I can forgo productivity since that is a longer term challenge.
But my point is that there is no coordination across the G20, or even the G7. There is no apparent collaboration and alignment of monetary policy. In periods past the conditions we see today have led to such alignment. So much so that in August I wrote an open letter to Christine Laguarde to call for a new Bretton Woods agreement. We need the IMF to fulfill the goal set for it by its founders. Just operating as a passive narrator is not enough. Our global economic recovery needs leadership.