Thursday, February 20, 2014

G20 Meeting - More Talk - Minimal Results?

With the G20 set to meet this weekend in Australia, here are three news articles that paint a picture that we can expect a lot of talk about growth, a lot of talk about the impact of FED tapering on everyone else, talk about how important it is for the US to adopt the proposed IMF quota reforms, and a lot of talk from Christine Lagarde on how important it is for everyone to cooperate. But don't expect much more than a lot of talk in terms of any actual results.

Here are links to the three articles and then a few selected quotes are pasted below the article links.

"Australia will champion the causes of emerging markets during its presidency of the G20, calling for concrete global growth goals, a re-starting of reforms to international bodies, and for the U.S. Fed to consider the wider impact of its stimulus taper."

"Mike Callaghan, director of G20 Studies Centre at the Lowy Institute for International Policy, hoped the global impact of the Fed's tapering would be discussed, but added that he was not expecting any major outcomes at this weekend's meetings."

"Hockey also said it was vital to complete the IMF governance and quota reform, which would give emerging powers such as China, India and Brazil a greater voice in the IMF. The plan has stalled because of the United States' failure to ratify it, annoying much of the developing world."

"IMF chief Christine Lagarde and British Chancellor of the Exchequer George Osborne on Thursday demanded emerging economies get their own houses in order, after some attacked US monetary policy in the run-up to G20 talks this weekend."

 "While Lagarde also cautioned the US Federal Reserve to be "mindful" of the impact of its stimulus exit on major developing players, Osborne urged emerging markets to refrain from "finger-pointing and distractions" at the Sydney meeting of G20 finance ministers and central bankers."

"The G20 financial leaders will most probably agree to the International Monetary Fund's proposal from last month to extend the deadline for the next round of reforms to the Fund until January next year, a result of the United States failing to ratify a 2010 reform."

"Officials from the BRICS countries, which include Brazil, China, India, Russia and South Africa and which are especially handicapped by the halt in the IMF quota reform, will discuss it, but there is to be no separate statement by the group. "There are no intentions to come up with some reproof or condemnation," the official said."

BRICS officials will meet on the sidelines of the G20 meeting, to discuss the creation of a development bank with capital of up to $50 billion and a $100 billion fund designated to steady currency markets."

My summary comments:

Lots of talk, no one expects anything major to actually happen. They all are going to agree to forget about the IMF reform proposal for quotas until January 2015. Meanwhile, the BRICS are going to move forward on their own since clearly nothing they want at the IMF is going to be happening this year. When you read through the articles you find more things they all disagree on than things they agree on.

My take is that there is nothing to indicate than any kind of global "reset" is imminent from the IMF this year. Unless there is another financial crisis,I don't expect much out of the IMF this year. It looks to me like the BRIC's are just going to steadily move forward on Plan B to bypass the dollar, reduce their exposure to it, and build their own system to move away from a dollar based system. They want the FED to taper the taper, but the FED has made it pretty clear they don't care what the rest of the world wants. For now, it looks like everyone is going their own separate ways.

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