G8 Weekend Summit?
Why Read: To once again focus on the importance of 'real' economic growth going forward to developed and developing economies.
Featured Article: A May 19 article that appeared in the China.org Blog reported on a Friday meeting of U.S. President Obama and just elected French President Francois Hollande held in advance of the G8 Summit meeting held this past weekend. The article quotes President Obama as saying, following that meeting:
• "President Hollande and I agreed that this (economic growth) is an issue of extraordinary importance, not only to the people of Europe, but also to the world economy"; and,
• "We're looking forward to a fruitful discussion later this evening and tomorrow with the other G8 leaders about how we can manage a responsible approach to fiscal consolidation that is coupled with a strong growth agenda".
President Hollande was reported as saying "growth must be a priority".
Commentary: Very surprisingly, this is one of the seemingly few articles that has been published up to 6:30 a.m. ET this morning on the G8 Camp David talks that were held this past weekend. First some facts:
• the G8 (originally the G6) came into being in 1975 when a first meeting was attended by France, Germany, Italy, Japan, the United Kingdom, and the United States. Canada was added one year later, and Russia was added in 1997; and,
• according to International Monetary Fund data, in 2011 these eight countries accounted for just over half of estimated World GDP.
|2011 GDP (U.S.$ trillions)||World GDP Ranking|
|Total World GDP||69.7|
|G8 as % of Total||51.4%|
With that background:
• of course growth must be a priority, much as breathing is a priority for everyone not ready to 'jump off a cliff'. Without real growth (i.e. 'inflation excluded' growth) economic stagnation or worse has to be the order of the day;
• real growth is not something that can be 'switched on and off' in the blink of an eye. In the current world economic climate real growth, while interesting to talk about over cocktails, real growth in any given country isn't likely to happen without a:
• vibrant and growing manufacturing base, and
• country specific export base;
• if the G8 leaders, who represent developed countries, want to see prospective economic growth (real or inflation included) they almost certainly at this stage will have to continue the 'rob Peter to pay Paul' Government funding scenarios that have been ongoing since at least 2008. This means they almost certainly will have to resort to further quantitative easing; and,
• President Obama, seeking re-election on November 6, needs the U.S. to show positive (at least inflation included, or to use an economist's term 'nominal') economic growth in the first three quarters of 2012. This very likely means that further quantitative easing, hinted at by U.S. Federal Reserve Chair Bernanke last week, will be 'coming to the United States soon'.
Again, the limited reporting on the Camp David Summit, at least until early this morning, is surprising. One might have thought that since economic growth apparently was a strong agenda item, one might have seen 'smoke signals' rising from Camp David more than once over the course of Saturday and Sunday. This is because 'blowing economic smoke' is one of the things many developed country politicians seem to excel at these days.