G20 - More Wasted Value? 4 / 1 / 2009

The all inclusive G20 are meeting in London today. Protesters will flock to the London Streets. There are many angry out of work Brits, so I expect the numbers of protesters to exceed estimates by 2x. President Obama and his 500 man entourage, will spend a few days trying to explain why the US was not the sole creator of today's financial mess. And he will be wrong.

When you are the worlds largest economy and by a multiple its largest supplier of financial "products" and the world economy tanks with systemic causes and effects originating from your economy, its your fault. Period.

Let's not spend anymore time discussing who or what groups are responsible (Greenspan, Clinton, Bush II, Greenspan, Wall Street and Money Center Bank CEO's and CFO's, Greenspan, China). Let's focus on this G20 meeting. Obama needs to spend his time reviewing the policies Fed and Treasury wonks are pinning together as solutions to this problem. Because 1 week from now no one is going to care that Obama has given an additional 4 "We are doing everything we are able to" speeches, or that the G20 members have each complained about the US and the international banking system.

But everyone will still care about where the economy is, and that we still do not have a handle on key corrective issues. Like how much longer are we going to keep non-productive white and blue collar workers in jobs with tax payer money? When are lazy fund and pension managers whose failed BB rated corporate debt bets on financial and manufacturing institutions going to write down their asset value? When will the clean out occur?

The longer managers of our economy put off the inevitable, the longer they seek to prolong the full write down of the US Economy, and thereby the World's collective economy, the longer they hope that interim fixes (Trillion dollar bailouts are not tiny I know) will limit the economic slide long enough so that stimulus packages can turn the economy around, the longer it will take for the markets to fix themselves and move forward and grow again.

See the managers of the US Economy (Money Center Banks, Federal Reserve, Treasury Department, Investment Banking Heads, the Executive Branch) have known for years what is coming. The US economy can only grow by growing the World Economies it sells its services to. Grow your business by growing the customer base, right? Basic economics but at a macro level. The problem is that you lose your position of dominance over time. You may still be the biggest and the best, but you are less dominant. When your manufacturing base is lost, and you are not building value but advising on how to leverage value, your position as world economic dominator is coming to an end.

The United States economy managers need to allow the forces of the world markets to reset the US value, much like they reset the Japanese value in the '90's (don't forget, Japan was "THE" Economy in the '80s), and they need to do it quickly. The current process allows non-value producers to cling to their jobs much longer then they should. Let our wages sink to a point that it makes sense for us to recapture and rebuild our manufacturing base. We make the best products (other than cars) it just costs too much right now to make them.

So here is the solution, devalue the dollar - force everyone to take their lumps. The dollar devalued will have a huge ripple effect through out the world's economy. It would cause political and social unrest in much of the third world, and damage most of the G20 economies to some extent. But it will force all currencies to devalue over time so they may access our markets. And given the efficiencies of the world markets, the recovery will be much faster than the 10 years of the Great Depression. Maybe 2 years.

Make no mistake, this day is coming, but let's hope its on Obama's watch, and not on the next President's watch 4 years from now. If the US fails over the next 4 years, the world's economy may take 50 years to recover to 2006 levels. Obama and the US economy managers can not fail to lead the US through the necessary changes. If this President wants to bring value to the G20 summit, he needs to tell the World Economy just how bad things are. Let them react, let the markets reset and then in 4 weeks when the dust settles present bold solutions to fix the problems managers of the US economy created over the last 15 years. Do not delay the process any longer or the value of the US economy will continue to erode.

Build Value Every Day

Brad van Siclen


P.S. Here is the list of the G20 members. Make your own conclusions -

* Argentina
* Australia
* Brazil
* Canada
* China
* France
* Germany
* India
* Indonesia
* Italy
* Japan
* Mexico
* Russia
* Saudi Arabia
* South Africa
* South Korea
* Turkey
* United Kingdom
* United States
* The Head of the European Union