Smile, Wave, And Go Home
President Obama, Chinese President Hu Jintao and a bunch of other world leaders came together at the G-20 summit this week to talk about the economy. They failed to agree on much of anything.
In particular (and not surprisingly) they couldn't figure out what to do about a deep, long-standing problem: Year after year, the U.S. imports more than it exports, and China exports more than it imports.
The grease that makes this wheel spin is China's ongoing purchase of huge sums of U.S. Treasury bonds. That keeps China's currency and exports cheap, and makes it easier for the U.S. to prop up its economy with persistent budget deficits.
The U.S. came into the conference backing a plan that would push countries to limit their trade surpluses and deficits. China came complaining about the Fed's recent decision to create $600 billion out of thin air, which drove down the value of the dollar relative to other currencies.
But in the end, everybody basically said, "Yeah, we know this imbalance is a problem, but we can't agree on what to do about it."
Here's how you say that if you're the G20:
Persistently large imbalances, assessed against indicative guidelines to be agreed by our Finance Ministers and Central Bank Governors, warrant an assessment of their nature and the root causes of impediments to adjustment ... recognizing the need to take into account national or regional circumstances, including large commodity producers. These indicative guidelines composed of a range of indicators would serve as a mechanism to facilitate timely identification of large imbalances that require preventive and corrective actions to be taken.
Money quote from the FT: "You can tell how difficult the negotiations were by how bad the language was," said one British official.