Pittsburgh is famous for its Three Rivers. The city was founded in 1758 at the militarily and commercially strategic point where the Allegheny and Monongahela rivers converge to form the might Ohio. It is somewhat ironic, then, that as the G-20 leaders arrive in Pittsburgh this evening for a sumptuous dinner hosted by President and Mrs. Obama amidst exotic flora and fauna at the Victorian-era, glass-walled Phipps Conservatory, they bring with them three major proposals for discussion.
President Obama wants to impose upon China (and Americans) his “Framework for Sustainable and Balanced Growth” which would demand that American consume less and save more, while requiring the Chinese to ramp up domestic consumption and reduce its trade surplus (presumably by revaluing upward the yuan and making Chinese exports less attractive).
Unfortunately the President did not consult fully with the American people before he signed them up for this potential financial fitness regimen, nor does he have any way to enforce his framework (short of ceding American sovereignty to some sort of global UN police state). The President also fails to take note in his framework of the massive, hemorrhaging fiscal deficits his costly programs could create if they are all passed by Congress. The President demands that American consumers do without and save instead of spend, but pushes “negative savings” in the form of huge Government deficit spending for as far as the eye can see. He could achieve his goal so much more easily by simply cutting the deficit by $500 billion or so per year.
Meanwhile, the Chinese are responding by putting pressure on the President Federal Reserve Chairman Bernanke and Treasury Secretary Geithner through the rumblings they are promoting abut looking for a replacement for the dollar as the world’s reserve currency. Of course, the reality is that there is no replacement handy right now. The Chinese didn’t get very far six months ago when the floated the idea of using Special Drawing Rights (SDRs) issued by the International Monetary Fund (IMF).
Finally, not to be ignored, the Euros are demanding that the world (read the U.S.) use government regulations to put limits and controls on bankers’ compensation. Funny how regulations come so easily to them, while trust in marketplace discipline seems foreign.
Should be an interesting meeting……