20:20 vision
The G20 communique was singularly lacking in clichés so there's few for starters
So far so good. Well, it’s a start but the proof of the pudding is in the eating. The G20 communique was singularly lacking in clichés so there’s few for starters.
Gatherings of world leaders generally come with low expectations. Little if anything is expected to be settled, no concrete proposals are awaited with anticipation and any pronouncements are presumed to be meaningless compromises.
I was not alone in fearing that we would get more of the same from the end of the world conference at the end of the Docklands Light Railway. I did consider it a major step forward that world leaders were prepared to gather to discuss the economic crisis and I am not being sarcastic when I say that I was prepared to settle for a pretty bland ‘we’re all on this together’ type of statement.
For the meeting to run its course without a bout of mutual recrimination would have been a pleasure in itself. To avoid the threatened split between US/UK and France/Germany would bode well for future cooperation.
It was enough for the meeting to focus on how we get out of this mess rather than who got us into it.
So it was a pleasant, almost overwhelming surprise to discover that concrete proposals have been put in place. We have yet another massive amount of money thrown at the problem, another $1 trillion that is beyond the comprehension of everyone, including the people making the grand gesture.
That is probably the least important of the points agreed. Those world leaders who will find themselves – or rather their countries – stumping up the cash will be looking to cut back on this and all the other trillion dollar commitments that they hope will not prove necessary.
The one agreed measure we can all be sure of is the hounding of tax havens. Forcing people to pay tax to pay for those trillions of dollars will be a high priority and most of the havens such as Liechtenstein are small enough to be bullied.
The ball is very much in our court as most of the culprits have some sort of relationship with the Crown: Isle of Man, Guernsey, Jersey, Gibraltar, Cayman Islands, British Virgin Islands. Perhaps we can leave France and Germany to sort out Switzerland, whose attitude to this further encroachment on its cherished banking secrecy will be interesting to behold.
The promise of greater regulation of the global banking system is to be welcomed. The great free-for-all that has characterised the past 20 years has shown capitalism at its worst. Free markets are all very well but they tend to swing rather too far one way and then the other until someone falls off.
While some banks were apparently making vast sums of money through reckless lending it was hard for more disciplined rivals to stand back while others gathered in the spoils. We do need some global rules.
I take the bit about controlling hedge funds with a pinch of salt. Hedge funds have proved a very useful bogeyman. Not only do they rank alongside short sellers and speculators in the hate list of people we don’t understand but we are sure are up to no good, hedge funds actually are short sellers and speculators so they can be castigated three times over.
Hedge funds did not cause the mess, they merely took advantage of it. Most of them have got their comeuppance anyway. Perhaps they can be legislated out of existence in their present form but they will re-emerge in a new guise for as long as there is quick money to be made by betting against the herd.
We will have to wait and see whether the decisions in Docklands translate into meaningful action, let alone whether that action will work. More unemployment and more government debt will pile up here and in most developed countries in the meantime.
However, this could well be the turning point and while the leap in share prices could peter out it may at last be time to call the bottom of the stock market.
Full house
Could it also be time to call the bottom of the housing market? Mortgage lending is still way below the levels of a year ago but is starting to pick up from a low level. Ditto house prices after falling for 16 consecutive months, according to Nationwide, although Halifax disagrees.
Those who bought shares in house builders before this week have already been rewarded for their bravery. The gap between demand for housing and supply is now greater than ever. Hang on for the ride.
