new world order? what with this ls depression, absolutely!

the g20 summit in london is immensely instructive in several ways. from a governance point of view i am quite sure that we can say goodbye to the old imf and world bank dominated by the usa and europe. other countries have been invited to the table and will have a say: china, russia, india… this has been helped by the global aspect of the recession and the willinginess of the new us administration to concede it cannot go it alone anymore – a point brought home by the diminished pull of the usa due to its current economic weakness and the havoc wreaked by eight years of “my way or the highway” bushism. from a governance point of view again, all major nations have realized that this recession – no one dares call it the ls depression yet, ls standing for “low simmer” – has struck the death of a certain interpretation of capitalism, extreme free markets capitalism. and that is a major achievement. yet, none of the major nations understands the severity of the crisis and what a new world order should and will look like.

anglo-saxon countries want more stimulus packages, in the belief that with some tinkering at the edges, business as usual will soon point its rosy cheeks. european countries, leery of inflation – germany in particular – want more structural changes and less stimulus, in the belief that the rules need to be changed before said rosy cheeks reappear. thusly they all collectively mid-wived a lopsided agreement which calls for more dry powder for the imf, some money to ensure markets stay open and a assortment of statements of intent to end tax havens, regulate hedge funds and more bank regulation. although this agreement goes in the right direction, it lacks a proper international stimulus package and any enforcement teeth behind the proposed new regulations. effectively, european positions blocked much needed stimulus and anglo-saxon positions blocked real effective new regulations. still we are heading in the right direction and i fully expect more meetings, and more proposals, and more changes, ultimately bringing about a new world order.

each country is right now unsure and afraid to make a first move, or just afraid it will end up being the main looser in that new world order. still everyone has more to loose by doing nothing. so expect more changes. the us and europe want russia to morph from an erratic bear to a more manageable animal. china is terrified it will loose much if the dollar erodes – it holds too much $ denominated assets. the us realizes it cannot dominate as much as it has in the last 60 years and will readily cede some power and say to europe, china, russia, india; but not too much and not too fast. europe is unsure how to further its integration diplomatically, militarily and economically. india wants to keep integration in the world economy. each has its own set of domestic politics, policies and election variables to deal with. yet, all have faced the possibility of a meltdown and are convinced coordination on more solid ground is needed. so, again – hate to repeat myself… – expect more decisions over the coming 12 months towards a new world order both financially and economically.