The leaders of the G-20 nations met in Washington DC over the weekend. The discussions that were had were in secret, but it seems that the main result of the meeting was the schedule the next. You see, these talks were not attended by President-Elect Obama. Instead, the assembled leaders had to make do with George W. Bush who will only be in office for another couple of months. That would make it rather hard to get any serious business done.
Politically, I think it was the right decision for Obama to not attend. The goal of the meeting was not going to be desirable to the United States. The roster of G-20 leaders basically amounts to countries the US owes money, who want less protectionism in order to help their own economies, and those who have been burned by buying “toxic debt” from us. Often, a single country can be filed in more than one of these categories. What is happening here is nothing short of an intervention. As if the friends and family of the US were forcing it to sit down and listen so that it might come to understand: “you have a problem.” And, after interventions, discipline and recovery is supposed to follow.
Really, who wants that?
Obama is in a particularly hard situation. He was elected on the Democratic ticket and they are already calling for a bailout of GM. Of course, by doing so, they will be protecting the jobs of autoworkers who have been one of the most ardent supports of the Democrats for decades. So Obama is caught between the nations of the world who want to have a “talk” with him and his own party that is basically saying “The Republicans have thrown money at their backers for too long; it’s time we get to throw money at ours!” It’s a no-win situation. By not attending, he’s at least playing hard-to-get.
I can’t imagine a worse time to be President than right now. While I feel that Obama will play the politician and negotiator, and try to say as little as possible for as long as possible, the forces at work can’t be kept waiting forever. They will want an answer. GM wants a bailout, and the G-20 wants the US to get its financial house in order. Doing both isn’t possible and neither is putting the question off forever. Returning the US to the path of financial discipline is an unpopular one in the best of times; today, doing so would involve alienating the very party that got you elected. Meanwhile, throwing more and more money at the collapsing economy will just hasten the collapse of the dollar on the world stage. The G-20 leaders, seeing that the US is not ready to end its addiction, will start making plans for how they will alienate the addict and instead do business with one another. And that can’t be good.
This is most likely the beginning of the end for the dollar.
The US is simply in denial regarding how bad the situation is, and the G-20 isn’t going to be able to penetrate a denial of that magnitude. Regardless of how many incidents you try to recount to the addict, until they’ve bottomed out, there is just no talking sense to them. I’m sure Obama can be made to see the reality of what is happening, but I doubt he has the ability to convince a nation that now’s the time to kick the “print more money” habit that has seemingly played out so well for it. Failing that, what else can really be done but to delay the inevitable?
And so the chase has begun — between our creditors who want to schedule a serious meeting so that we can have a little talk — with the REAL President in attendance this time — and the man who cannot, try as he might, find a win-win solution to all of this.