Duncan’s Economic Blog

A quick G20 response

Posted in Uncategorized by duncanseconomicblog on April 3, 2009

Just a quick G20 response.

I was pleased and surprised by the outcome. The regulation and tax haven stuff is all good, although beside the immediate point.

But both the IMF expansion and the international trade credit facility are very welcome, and both bigger than I was expecting.

The trade facility in particular will be a great help to the global economy.

I think Brown has played a blinder on this.

I’d suggest two challenges for the Government now.

First, start selling this to the public in terms of how it helps Britain. I.e. explain how the trade facility will directly aid our manufacturers. At the moment it all seems a little remote from the ‘man in the street’.

Second, the budget. Whilst a larger stimulus seems to have been taken off the table (which I feel is a mistake), targeted action is still possible. The focus should be jobs – not merely training, but actual jobs. A house building programme would be my preferred option.

As a final word, let’s not get too excited by some of the better than expected (but still dreadful) data we’ve had on the world economy in the last two weeks. The rate of decline of various indicators seems to be stabilising, but the direction is still down. Let’s not start talking about ‘green shoots’ just yet.

With a bit of luck the G20 and some targeted fiscal action might get the UK economy growing again by Q4 this year, rather than my original estimate of Q1/Q2 next. But we need a bit of luck. And let’s not forget that economic growth which is not consumer spending led, will not feel as ‘good’ for most people. We’re not out of the woods yet, but well done Gordon.


7 Responses

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  1. VinoS said, on April 3, 2009 at 11:26 am

    I am concerned about the stimulus being taken off the table. France and Germany had a good point about regulating the markets and cracking down on tax havens. They are wrong in rejecting a Keynesian stimulus, though.

    As I wrote (http://vinospoliticalblog.blogspot.com/2009/03/fiscal-stimulus-could-be-partly-self.html), a fiscal stimulus might actually cost less than the headline figure and will stop the Eurozone sinking into a vicious circle of rising unemployment and falling consumer spending/confidence.

  2. newmania said, on April 3, 2009 at 2:20 pm

    What did you expect a quick game of ping pong and home ? Not a penny of cash has been pledged .On IMF Funds the extra $250bn is just a target. .Japan contributed $100bn to the IMF in January , not now . The EU has agreed to contribute $100bn at the last EU summit , not now . China`s $40bn is more or less the finger to the whole thing .A trade insurance scheme is called a “Kickstart.” And $250 billion .(over two years) Actually it’s an illusory $125 billion shuffled into a more prominent position , not money . The OECD has been publishing lists of non-compliant nations, for the last year but ,in the show ,its called a “Breakthough “ on tax havens . The Ban on new trade barriers is a hope ,which will be ignored as night follows day .
    Come on , this is shit , you have been on and on about how we need a global stimulus ( like a drunk needs a beer) and you have not got one .What would it take fo you to admit this was a pathetic PR bore ?

    • duncanseconomicblog said, on April 3, 2009 at 3:01 pm

      I would have prefered a stimulus package. I would prefer that the budget included a large stimulus package. I’m disappointed about that.

      I honestly am surprised by the size of the trade finance stuff. It will get funded, it’s in the interest of Japan, China, Germany and Korea to fund it.

      I think the tax haven and regulatory stuff is all good – but besides the immediate point of dealing with the downturn.

      Had Sarko walked out, I’d have called it a failure.

  3. knightbridge said, on April 4, 2009 at 3:01 am

    i agree with Gordon Brown that the G20 aim in this summit is to make sure that the banking system is reformed, to ensure ourselves that our financial institutions can come to the aid of the poorest countries and to make sure that we do what is necessary to ensure that there is strong growth and recovery and particularly jobs in the world economy as a result of the actions that we take…


    well i think the G20 aims to raised up to 1.0 trillion dollars for IMF is a bit off the course.

    since the IMF is proven for suffocating the countries they “aid” rather than truly helping them.

  4. VinoS said, on April 4, 2009 at 8:01 am

    The good thing about cracking down on tax havens is surely that, in the next boom, the government will be able to reduce the PSBR by more than it would do otherwise by taxing the money salted away in tax havens that they wouldn’t have known about before.

  5. snowflake5 said, on April 4, 2009 at 3:55 pm

    VinoS – both France and Germany are stimulating their economies by quite a lot, it’s just that they don’t want to admit it out loud because of the foolish things they said last Oct when they assumed wrongly that the crisis wouldn’t affect them.

    Plus, because they both have big welfare states, the automatic stabalisers have kicked in. The US doesn’t really have such stabalisers, hence their need to stimulate more than everyone else. Ideally the lesson the Americans will learn is to build a welfare state as protection for the future – but they are a difficult nation to govern and Obama will need all his political capital just to get his healthcare reform through.

  6. VinoS said, on April 4, 2009 at 5:17 pm

    Fair enough point re the automatic stabilisers in France and Germany. They will result in more deficit spending even without a special stimulus. Am not sure they will quite be enough, though.

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