|
|
G20: Give or Take a Trillion or Two
Analysis by Sanjay Suri
LONDON, Apr 3, 2009 (IPS) - The ease with which leaders spoke of trillions of dollars at the G20 summit in
London Thursday was no doubt intended to signal to the world just how
serious leaders are about getting the economy right again. That these fabulous
figures may never add up is another matter.
On early trading Friday morning, the markets showed no great excitement.
The Financial Times index was in fact marginally down, after rising on hopes
through Thursday that the leaders will somehow do something.
It just might be that what got through was not so much confidence as an
anxiety to present it. Some of the additions seem to have counted in a touch
of desperation.
British Prime Minister Gordon Brown produced the biggest figure of all – 5
trillion dollars. And a trillion, not to forget is a thousand billion, or a million
million if you like. It takes all of 12 zeroes after one.
And the five trillion? It would be, Brown said, the absolute sum total of all
financial stimulus in all forms in all countries by the end of 2010. For
example the new capitalisation of banks in the U.S. and in Britain, measures
like quantitative easing that mean in effect that governments simply print
more currency notes, or generate new money electronically to swell
availability for banks and bonds.
Some of these billions – and at the G20 billions sounded like small money –
have come and disappeared. Take the 100 billion dollars or so of
quantitative easing announced by the Bank of England. It was meant to
inspire confidence. No one has seen either the money or the confidence.
And the U.S. fiscal stimulus, alongside the money going into the automobile
industry seems not to have brought a fraction of the results it was intended
to. With the first flows of that trillion as good as evaporating, Brown's total
would include money that came and also went, almost soon as it came.
Never mind where. But certainly not in a way that may have made a huge
difference to the economy.
And given these early trends, it must take a lot of confidence for Brown to
project that more such money will continue to come in all of the rest of this
year, and all of the next. Gordon Brown may well go wrong by a few trillions
here and there. At other times that would expose an economist to serious
charges of error of judgment; now nobody minds too much whether trillions
will add up to a total of five. And this is at least partly because governments
now carry very little credibility.
And the lack of credibility in such figures might of itself undermine the
confidence they were intended to instil.
The other trillion, a more precisely worked out 1.1 trillion dollars, was
announced for the International Monetary Fund (IMF), regional development
banks and international trade finance.
This includes 750 billion dollars in funding for the International Monetary
Fund, 250 billion for trade finance and 100 billion for multilateral
development banks.
Of this 500 billion dollars in loans will come from member countries, 100
billion each from the EU, the U.S. and Japan, and 40 billion from China. The
rest, it is assumed, will come from somewhere else.
And now the IMF too is going the way of the U.S. and Britain by
manufacturing money, for which the official euphemism is of course
quantitative easing. And that will come by way of an extra 250 billion dollars
in special drawing rights, a sort of lending currency that is the IMF's own.
The declared intention is that all this is for the poor. Another declaration
comes that the IMF will also sell its gold to fund aid for poor countries. A lot
of poor people in the world, and others not so poor but hit hard by recession
will be looking to see how much of this money comes along to make
anything better for them.
About half the world – more than 3 billion people – live on less than 2.50
dollars a day. And talking billions, that is a real figure.
(END)
|
|
|
|
|
| |
|
|
|
|
|
|
What is RSS?
