G20 economic questions

By Ben Walsh
September 5, 2013

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Under normal circumstances, the most important things to happen at a G20 meeting are cordial handshake photo ops. (Here’s our roundup of April’s meeting.) This G20 gathering, hosted by Russia in St. Petersburg, is already looking quite different. Here’s our guide to the major themes being discussed at the G20:

Syria:

Reuters’ Timothy Heritage reports that the split between the US and Russia over Syria is likely to overshadow a meeting that was supposed to be focused squarely on jumpstarting the global economy. The Council on Foreign Relations’ Stewart Patrick says that as a result, this G20 will be the “summit of compartmentalizing… focus on economic recovery while ignoring the elephant in the room”. Sort of the international relations version of how you get along with your family.

The European Union seems to have already succeeded by that measure. Their official pre-summit communique doesn’t even include the word Syria and instead focuses on lofty, inactionable summitbabble about “making decisive progress on the way to sustainable and inclusive global growth”.

China has also warned of the economic risks associated with a US-led intervention in Syria — a $10-a-barrel rise in oil prices, Chinese Vice Finance Minister Zhu Guangyao says, could cut global growth by 0.25%.

The Federal Reserve:

Despite the ongoing Syrian crisis, one of the big themes of the meeting is the impact of the Fed’s plan to scale back its $85-billion-a-month buying of Treasuries and mortgage-backed securities. This “taper” has already been blamed for emerging markets stock declines and the melee in the Indian rupee. The MSCI Emerging Markets Index of global emerging market stocks has fallen more than 11% so far this year.

China:

Today, Russia and China expressed concerns that the Fed’s actions could derail global growth. China’s deputy finance minister said the US should be “mindful of the spillover effects” of its actions.

Japan:

Japan, which is in the midst of an aggressive fiscal and monetary stimulus (a/k/a Abenomics), will tell the summit that it is going ahead with a planned sales tax increase. Any pressure that increase puts on economic expansion, however, may be offset by additional government spending. Prime Minister Abe will tell the G20 that he is sticking to his strategy of making economic growth the cornerstone of his policy agenda. The Bank of Japan says recent data shows the country’s economy is “recovering moderately”.

Euro zone:

Interestingly, for the first time in what seems like years, the euro zone isn’t being discussed much. Recently, there have been signs of a nascent European recovery in the form of increasing growth rates in Britain and Germany. According to the Guardian, UK Chancellor of the Exchequer George Osborne is preparing to report that the “recovering UK economy may move Britain from the slow lane of ailing European economies to being ranked alongside the US in terms of performance”. European Central Bank president Mario Draghi announced today that rates would be unchanged.

Corporate taxes:

The FT’s Vanessa Houlder and Javier Blas report that G20 leaders want to take measures to reduce tax evasion. Specifically, the Dutch have said they will help “renegotiate loophole-ridden tax treaties with nearly two dozen developing countries”. The top tax official at the OECD said the G20 could take action that would be the precursor to automatic exchange of tax information between nations. Kofi Annan has a good guide to this long-debated topic — and how it could end up helping African economic growth. — Ben Walsh

On to today’s links:

Long Reads
The (few) women of Wall Street, and why they leave – Quartz
“Little bastard,” the poker bot that’s nearly unbeatable by human players – NYT

Milestones
Interest rates for jumbo mortgages are now lower than for loans for smaller homes – Nick Timiraos
The balance sheet recession is about over – Bonddad Blog

New Normal
Syria is the new TARP – Neil Irwin

Reversals
Americans are buying cars at a pre-financial crisis levels – WSJ

Oxpeckers
Adblock Plus’ ad revenue and the internet economy – Andrew Leonard

Mergers & Awkwardness
The first gun maker acquisition since the Newtown shootings – Michael de la Merced

Regulations
“Bank leverage is the defining debate of our time” – Simon Johnson
The sad tale of how money market fund reforms died – Bloomberg

Alpha
Awesome financial advice on one index card – Harold Pollack

UGH
How the sequester is hurting Nevada’s unemployed – Annie Lowrey

Whew
Stop panicking: America’s fertility rate has stabilized – WSJ

The Fed
Larry Summers will do everything perfectly, say Summers’ friends – Zachary Goldfarb

JPMorgan
JPMorgan is getting out of the student loan business – David Henry

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