G20 summit: showdown in Seoul

[CHIMO]

To get an idea of the kind of pressure Barack Obama is under this week, as he heads to South Korea for the G20 summit of leading economies, take a look at a recent video from a group called Citizens Against Government Waste. Easy to find on the web, it is set in a classroom 20 years from now. A Chinese professor asks students "Why do great nations fail?", and charts the decline of the US – which apparently borrowed and spent its way into collapse. "We owned most of their debt," he explains in front of a flag of the People's Republic. "So now they work for us." The classroom laughs.

Hysterical? Surely. But this video undeniably reflects a wider national anxiety, one played out on Capitol Hill, cable news, and the op-ed columns: if crisis-hit America is losing its economic pole position, say the worry-mongers, it is still-booming China that will overtake it. And so the free trade and open markets that Bill Clinton and George Bush told voters were so important for national prosperity are now depicted as part of the reason why America is struggling to find its groove.

If this sounds familiar, that's because it is. Economic crises have a habit of reviving protectionist politics. Within months of the Great Crash of 1929, Washington politicians brought in the Smoot-Hawley tariff, which slapped duties on tens of thousands of imported goods. When policy wonks talk about the harm done by trade wars, it is the Great Depression they normally mine for their richest source material. This time around, the Obama administration is complaining about Chinese manipulation of its currency, which make its exports more competitive. For their part, the Chinese, and plenty of others besides, grumble that the new round of quantitative easing begun by the American central bank last week will weaken the dollar and so harm their exporters. In many cases, governments are moving from words to action. In Canada, the administration last week all but killed an Australian takeover bid for a fertiliser company, ruling that it was not "of net benefit" to the country. And it is not alone in shooing away foreign cash; a study last week by the Organisation for Economic Cooperation and Development and the United Nations Conference on Trade and Development totted up a whole series of protectionist measures by governments around the world, from Australia to Saudi Arabia.

Which brings us back to the G20 summit in Seoul at the end of this week. In the short period since the G20 replaced the G7 as the world's leading forum for big countries to conduct economic diplomacy, this next meeting is likely to be the tensest yet. G20 meetings over the past couple of years can be summarised thus: first, the attempt to coordinate policies to battle the global financial crisis, second, the not-so-cordial agreement between countries to go their own way (President Obama and Gordon Brown almost alone in wanting to keep state stimulus going), and now the first shots in what may turn out to be a series of trade skirmishes. These are by no means discrete episodes: it is largely because the G20 quashed the idea of a global stimulus package last year that its members are now squabbling over what each other is doing in their own backyards.

http://www.guardian.co.uk/commentisfree/2010/nov/08/g20-summit-showdown-seoul

[bemildred]

1. Dang, who could have predicted this? nt

[DoctorK]

2. completely misses the point

"Hysterical? Surely. But this video undeniably reflects a wider national anxiety, one played out on Capitol Hill, cable news, and the op-ed columns: if crisis-hit America is losing its economic pole position, say the worry-mongers, it is still-booming China that will overtake it. And so the free trade and open markets that Bill Clinton and George Bush told voters were so important for national prosperity are now depicted as part of the reason why America is struggling to find its groove."

The commercial isn't highlighting out economic strength built on free trade and open markets, it is highlighting how overspending by the federal government is creating a debt burden that will sap future prosperity (to the benefit of those buying our debt - the Chinese, etc.). You don't need the citizens against government waste commercial, just look at the last budget that Obama put out:
www.whitehouse.gov/sites/default/files/omb/budget/fy2011/assets/tables.pdf
Here is the net interest expense budgeted for the coming decade, and it's total burden (this doesn't buy services, just pays interest to bondholders (e.g. China, Japan, Federal Reserve, banks, etc.)

2009 - 187
2010 - 188
2011 - 250
2012 - 340
2013 - 434
2014 - 516
2015 - 586
2016 - 652
2017 - 716
2018 - 779
2019 - 844
2020 - 912
2011–2015 - 2,126
2011–2020 - 6,029

The cost of the debt now is negligible because most of it is held in short term bonds with very low interest rates, the higher amounts in later years reflect the expectation of more normal interest rates, and the addition of the anticipated deficits.
In just a few years we'll be spending as much on our existing federal debt as currently do the military and the wars. Over 2 trillion dollars will be spent between now and 2015 just on maintaining the existing level of debt - not buying medicine, food, investing in infrastructure or people.
To surrender 6 trillion dollars in interest (that is more than the size of the entire Chinese economy!) over the next 10 years is insanity. We have to pressure the government to not spend more than it takes. If we don't, at worst our future earnings are sold to overseas investors and at best our future earnings are sold to US banks/Federal Reserve, and we bear the cost through higher inflation.

[bemildred]

3. Yeah, but those dollars will only be worth $.10 so we will actually owe less!

Isn't that comforting?
:sarcasm:

Seriously, our "leaders" look very deer-in-the-headlights about this, on autopilot, trying to keep the old game alive just a bit longer is the only real strategy I see.