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Clowns to the Left of Me…

Posted by Larry Doyle on March 24, 2009 12:52 PM |

I wrote earlier today about the ongoing pressure being applied on our senior financial representatives in Washington by their counterparts in China. In Congressional testimony this morning, both Secretary Geithner and Fed chair Bernanke have discounted China’s call for a new international reserve currency. 

The Obama administration is not only being pressured by China prior to the upcoming G-20. Our European allies also have a decidedly different tact on the appropriate financial maneuvers for global governments at this time. While the United States is currently promoting the need for massive fiscal stimulus on a global basis, the WSJ reports from Europe, ECB Chief Says Stimulus Not Needed

Will the G-20 bridge the differences in these camps? Will the photo ops merely display a lot of smiling and backslapping? I am sure the respective leaders will be cordial, but in the midst of those photo ops will they be thinking, “clowns to the left of me, jokers to the right.”

One of the great historical lessons I learned when studying in Germany was the military reality of having a war fought on one’s own soil. My German professors and friends impressed upon me how Americans do not fully appreciate the horrors of that experience. Subsequent to that horror, Germany suffered the pain and anguish of hyper-inflation. Clearly, those experiences continue to impact their approach to fiscal and monetary decisions today. 

In a similar vein, China saw firsthand how the IMF, in the spirit of helping, truly punished the countries of Southeast Asia on the heels of their financial turmoil in the late 90s. China has developed massive government surpluses in order to avoid a similar experience again. 

Against both those backdrops, the leaders in Asia and Europe bring their own perspectives to the G-20.  Each of these camps may very well view the U.S. as truly being the greatest drag in global finance. 

. . . stuck in the middle with you . . .


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