G20: Words and Walls

Germany's finance minister calls the US economic model "in deep crisis" and describes the country's policy response as "clueless".

Germany regards the Federal Reserve's quantitative easing programme as a dangerous dance with inflation; the US sees it as a legitimate attempt to generate demand for the benefit of all.

"The issue of the Renminbi is one that is an irritant not just to the United States, but is an irritant to a lot of China's trading partners..." - Barack Obama

China says it risks social unrest if it allows the yuan to appreciate rapidly against the dollar.

 4% cap on current account surpluses - says Tim Geithner, U.S Treasury Secretary  - Germany slams this down.

"Smiling family photographs marking the attendance at international gatherings are no substitute for specific actions" (January) - Mervy King, Governor Bank of England

"The fear we should all have is a return to what happened in the 30s: protectionism, trade barriers, currency wars, countries pursuing beggar my neighbour policies – trying to do well for themselves but not caring about the rest of the world. That is the danger..."
"Now on the big battle, the biggest issue of all is the cause of the last crisis – a wall of money in the east, a wall of debt in the west. We've got to deal with that imbalance and I think it's a real test for this summit and one that Britain will play a very positive part in trying to make sure we really look at these imbalances and deal with them." - David Cameron

Just for some perspective, it's important to see who is a surplus country and who is a deficit country.

"Recycling surplus savings into investment in developing countries will not only address the immediate demand imbalance, it will also help to address developmental imbalances. In other words, we should leverage imbalances of one kind to redress imbalances of the other kind." - says Dr. Manmohan Singh


Our PM also says we must avoid competitive devaluation and protectionism. He said advanced deficit countries should move towards fiscal consolidation and sustainable borrowing. For rebalancing of global demand he suggests the advanced deficit countries should work on their competitiveness and efficiency. And the surplus countries should increase domestic demand. And finally he added that countries must not manipulate their exchange rates.