G20 - so they do these things because?

As readers can imagine, the Capitalists are not really big fans of One World Government as our distant relations on the left seek. Indeed, I was rather keen on the Scots going independent, let alone the whole world uniting. This is before we get to the EU.

But over the weekend something magical did not happen. The leaders of the G20 met in Australia. A cause for joy in the press as it generated a lot of pointless headlines around the world. Powerful men and women of these Government spent a long time taking selfies with one another.

The world look sternly at Putin and told him he was naughty. He left. After having a long chat to the Saudi's - no doubt trying to re-kindle the deal he so unwisely rejected earlier in the year.

Cameron and the other leaders declared they had reached a deal to boost Global growth. Sadly, despite a bit of searching, it is pretty hard to find any real evidence of this beyond a headline. No doubt they hope no one will ask to many questions when they all get home.

These G20 meetings are the ultimate junkets - worse than abominations like the Copenhagen summit on Climate Change. At least that had a purpose. I note the key announcement on cutting Carbon emissions by both China and the US were made in the days before the G20 summit - not wasted for the time they were there.

G20 summits are just an excuse to go to Bondai beach, socialise with other world leaders and discuss what jobs you can get next when the electorate or jihadi's have had enough of you. China has signed a small trade deal with Australia that would have happened anyway.

What a waste of time and resources these things are. Is this not what the UN was supposed to be, so everyone could go and show off in New York every now and again?

Falklands distraction

Whilst waiting for the non-even that is likely to be the g20 communique, this little spat between Cameron and Argentina's President Kirchner is quite amusing.

Kirchner's increasingly pathetic ramblings about the 'Sovereignty issue' are starting to have a negative feedback effect on the Country. Cameron helpfully pointing out that Argentina's policy of nationalisation is not really a world leading achievement.

Shame Kirchner could not point out our nationalised banks in return, but then I guess her advisers are not so well informed or numerous as her British counterpart.

A little bit of manufactured nationalism, seems to suit all sides perhaps? I expect this story to drone on.

Can the world change?

The latest pre-G20 report has same merit in that it at least speaks the truth. the stimulus being applied to a sickly world must continue for a short while yet and then a concrete plan must be made to phase it out.

Then and more importantly, deficit countries like the UK and US must rein in their spending and save more; whilst purely export driven companies like China and Germany will be pushed to develop their own internal consumption to a higher level.

The difficulty is to see how this will be enforced. The Germans love their beggar-thy-neighbour policy which has helped to crush Italy and Spain as economic powers. China will find it hard to increase demand in such an impoverished society; meanwhile the UK and US have addicted consumer societies that will also find it hard to accept was is in effect a lower standard of living today for the benefit of developing longer term prosperity.

Also I do not see how the actions of the Climate Change are bound into this. The vast reductions in CO2 emmissions being put forward will require slower economic growth all over the world in order to allow the technologies time to be developed and deployed.

The world faces some challenges which are structural in nature; we don't have a very good history of dealing with these without major wars, perhaps though the resolution of the cold war gives us hope.

Why G20 banking regs won't work

the papers that i have read today and this blog piece by Robert Peston all agree that the G20 has been something of a triumph for global co-ordination. Yes, the bankers bonus' make the line in the news, but commentators seem happy with the new proposed rule on capital regulation.

This is the idea that banks have to hold more capital to cover potential risk losses and that they must have lower leverage as a result. This should make banking boring.

The downside to this analysis is what I would expect from Financial analysts; in that they miss the politics. Why will France and Germany ruin their banks and ecnomies now when they see the problem as Anglo-Saxon capitalism. France and Germany already have higher public debt ratios than the UK and US.

There is not a chance this will be agreed to in its current form, whatever proclamations are made by G20 finance ministers. Global regulation will have to wait and in the meantime national governments are going to make up their own rules on banking.

Banker's pay distraction at the G20

Really, what a total diversion this G20 communique on bankers pay really is. Not only has no agreement been reached, but what has been suggested is already being implemented by the banks in any case.

Take RBS, there staff are having bonus' paid over up to 3 years, mainly in shares and with up to 75% clawback.

All this fuss is to cover up some much less happy international co-operation. Basel II is dead and we are moving back to a world where banks will be able to hold as much capital as their national regulator says they have to. In a globalised world this is a dangerous move, which could see big banks move to countries where they are required to hold less capital. A situation not unlike that which we have with tax havens.

But why all the focus on bankers pay anyway? Like Hedge funds, this is a distraction from the true causes of the credit crisis. These were lax monetary policy and in the UK the situation was made worse by the terrible fiscal policy of the Labour Government.

Not much mention or agreement on this at the G20, quelle surprise!

Sherlock Holmes and the G20 Adventure

As I entered the Great Detective's rooms at 221B Baker Street I called out "Holmes! Have you heard? The G-20 proclamation. It is a very great triumph for England, Europe and the rest of the civilised world."

Sherlock Holmes's quick eye took in the Daily Mail clasped in my hand. "Thankyou Watson. But your haste was unnecessary. I was aware of the communique, and the celebrated success of the G-20 some time ago." I glanced across to the 42" Plasma screen and Sky Cinema system which I had purchased as a Yuletide gift for Holmes and which in the intervening four months I had rarely seen switched on. Naturally he caught my gaze. He stood hurriedly, placing his breakfast napkin upon the tabletop. "Not on here, dear friend," he smiled, lightly brushing the flat screen. " Although this remarkable device allowed me to deduce certain features of this weeks events."

"Then how did you know of the results of the leaders summit in advance? It was a closely guarded secret. The BBC have only just announced the success of the mission. One trillion dollars of new finance," I asked.
Holmes sat in his favourite chair, smiled his thin smile and puffed his pipe. "Elementary my dear Watson," and he began his tale. "Firstly,there is no more money. Much of the $250bn in trade finance will come from existing programmes of export guarantees in rich countries, with only $50bn for poor countries. Therefore the sums will be a combination of previous amounts, already announced, or smoke and mirrors illusionist tricks. Remember the 'Strange Case of the 10p Tax Fraud?' This is similar. The Japanese, for example, announced their $100Bn in February. The extra $250BN for the IMF is coming from unknown lenders, as is the new so called Special Drawing Rights worth $250BN. That's $600 BN dollars of the $1 Trillion already. I dare say there are some sundry sums available to draw upon to complete the grand sounding communique. However the real reason that I already knew the financial term of the historic agreement was that the Germans announced it last week."

"Oh, I see," I said somewhat disappointedly. Holmes came to my side.
"But Watson, I did use your visual information device just today.I turned on the screen and received fifteen seconds of intense sensory data. By the exaggerated heave of the young woman announcer's breasts, I knew that either Alan Shearer had been made Manager of Newcastle United Soccer club or that President Obama had arrived in the country. Or, from her breathlessness, possibly both. From the image of an incoherent banner with 'Save Climate not Bankers' I knew that a protest march of disparate Eco-groups would descend upon the heart of the financial district. From a glimpse of Nick Robinson's head, I deduced at once that the Prime Minister had made an important announcement. What with the panic still infecting the markets and the PM's current low standing in the polls he would only make a very positive broadcast. A fleeting view of Her Majesty, led me to concluded the summit had been completed and a new record headline figure of finance had been agreed to save the world."

I looked a little deflated. It had all sounded so magical on Sky News. But Holmes cheered me.
"Come Watson. It could never have been any other way. Now let us turn to more important matters. Chancellor Darling has called upon us to try to find the missing billions from the Treasury accounts. But first, a quick game of Guitar Hero World Tour on this wonderful X Box 360*. Then we must hurry along to 11 Downing Street. The poor man is beside himself . His budget is four days overdue already. ...Turn up the volume and take the Bass Watson! The games a foot!"

G20: It demonstrates how witless politicians are

Finally the g20 meets today. There have been high hopes that this real summit can reach agreement on major issues that will help to slow the slide into Global Depression and perhaps even mark the bottom of the market so to speak.

However, what has been disturbing the past week or so is the divergent politics which are driving the agenda rather than facing up to real problems.

1. Tax Havens - Tax havens did not cause this recession and persecuting them is not going to cure it either. This is a political grab at trying to secure more tax base. it will fail and is the wrong move in any event. What logically you need to do is grow your own tax base, not try to steal someone else's. Why has this even made it onto the agenda? it is the politics of socialist envy.

2. Hedge Funds - Ooh, the bad guys. You know, the ones who said all the banks were broke and full of toxic assets and were proved right. hedge funds account for a small fraction of international financial flows, why all the attention? Again, they did not make the banks invest in sub-prime toxic assets and derivatives.

3. World Trade - Hooray at last, yes increasing trade will help the world recover. Finishing off Doha trade talks should be a huge priority. I hope they can do it.

4. Financial Regulation - Well this is a two edged sword, the right regulation is needed. The regulation of derivatives which has been lacking and support for the ratings agencies to make the markets work again. The idea should be to make the markets far more transparent, not to limit them.

5. Global Stimulus - Well the US and UK have come dangerously close to doing more than enough. The Euro area and China really do need to do more to stimulate demand. You can't save car factories is no one wants to buy their cars.

6. Global Currency - A crazy theoretical idea, but really, are the Chinese going to really undermine their dollar assets when they follow this logic through. How can a real 'world bank' work in conjunction with the world's democracies - already the European Bank is struggling to reconcile the different parts of the Euro area alone

Scoop:Is Britain planning on joining the Euro?

C@W have had a source emailing data for the last few weeks. This source, within the Royal Mint has been privy to some secret high level discussions that have recently taken place.
Although the whole picture has yet to emerge it looks increasingly likely that the United kingdom will abandon Sterling and join the Euro before the end of this parliament.

It is expected that Prime Minister Brown wishes to make the announcement during the G-20 meeting of world leaders to demonstrate his commitment to finding global solutions and his belief that nations must join and work together and forgo protectionism.
This is the price that Germany and France have demanded for endorsing and carrying out the fiscal stimulus package.

	British 2 Euro Pattern Coin
	British 5 Euro Cent Pattern Coin

British 1 Euro Pattern Coin

We obviously cannot reveal too much detail, but from another, separate source at the Bank of England it appears that the meeting between Mervyn King and Her Majesty, Queen Elizabeth II, was to approve the prototype design of the new Euro currency for the UK. Samples of these coins have been sent to us here. The enormous task of replacing the currency has been proceeding in secret ever since Sterling began falling in October 2008.

We have a final piece of evidence, currently being flown in from Munich by CU and we hope to see it arrive shortly, when we will do an update, before turning some of the evidence over to the BBC and other mainstream media outlets.

Remember.
You read it here first.

Trading the G20

One of the most obvious effects of the credit crunch has been to show the importance of politics in the markets.

These past years, hedge funds and banks have had analysts who were quantitative experts. They were maths grads and number men/girls. These people were the masters of the universe of financial prediction. And they were all wrong, almost entirely, swept away by the mistakes in their own algorithms (there is worthwhile comparison piece to be done here with Global Warming algorithmic predictions, but that is for another day).

Instead, perhaps those rubbished political economists should have had more of a say. Certainly the G20 is a gathering of the world's leaders and will point the market direction for some months to come.

In this situation it is therefore perhaps best to think of the likely political outcomes and develop a market strategy around that. Here is what I will do:

- Short Gold (ETF) - Yup, Gold falls on Dollar strength and economic recovery in other commodity assets like copper etc. My assumption is that the G20 will spin as a big success at least until the weekend. As such there will be continuing pressure on Gold which will see it drop below $900 an ounce.

- Buy Banks and Insurers - Stability as promoted by the G20 will push a further small recovery in these bombed out shares

- Buy Shipping (there is even a UK ETF now) - G20 will push for a resumption and completion of the Doha trade negotiations, this will boost the prospects for world trade and shipping in the short term.

All these trades have a very short time horizon as the events are this week and will probably unravel as countries start to spin success in different ways when the leaders are back home next week. I don't plan to stay in them beyond Friday. I wonder how the quants are modelling this?

UPDATE: Ok, closed out my positions this morning, SBUL, bought at 45.8, currently 47 (not selling yet, Gold might drop further if it closes under $900). LLOY, bought at 67.7, sold at 75, ETFS shipping, bought at 1140, sold at 1171. Aviva, bought 220, sold 245. Everything in the black, but I guess was a good week for the markets anyway. Still satisfaying though.

“everyone has a share.” The result of G20

Gordon Brown explains Milo Economics to the other leaders of the G20

Milo's M&M Enterpises syndicate is selling seven-cent Maltese eggs to the mess halls at a price of only five cents an egg while still making a profit.

How?

Seven-cent Maltese eggs cost the sellers in Malta four and one-quarter cents each to procure. Milo is actually buying the eggs from himself in Malta, which means that as a seller there he is making two and three-quarter cents each egg. After he resells the seven-cent eggs to the mess halls for five cents each, he is still making a three-quarter cent profit per egg.

However, it turns out that Milo's Maltese eggs are actually one-cent Sicilian eggs which he has secretly shipped to Malta to drive up their value, yielding him another three and one-quarter cents profit per egg.

 "I make a profit of three and one-quarter cents apiece, and everybody comes out ahead."

"Do I have a share?"

"Everybody has a share."

"Does Orr have a share?"

"Everybody has a share."

"And Hungry Joe? He has a share too?"

"Everybody has a share."

"Well, I'll be damned."

"What's good for M&M enterprises is good for the country"

But Orr crashed into the sea and when the crew went to inflate their life jackets..
The life jackets failed to inflate because Milo had removed the twin carbon-dioxide cylinders from the inflating chambers to make the strawberry and crushed-pineapple ice-cream sodas he served in the officer's mess hall and had replaced them with mimeographed notes that read: "What's good the M & M Enterprises is good for the country."

Chaplin: Cheer up Yossarian. Milo's selling oranges and the syndicate is making so much money.
Yossarian: We won't see any of that money. We won't even see the oranges.

G20 - New Labour rules the World

This may seem like an odd title. but I belive it to be true.

With George Bush overseeing things rather than Barack Obama, there is not much the US can agree too. Further more some of the more outlandish ideas, like moving back to the Gold Standard need to be considered over a period of time.

So what we will be left with is an agreement that something needs to be done. This will be tax cuts for all, which have already been pre-announced, a reduction in interest rates, which also have already been done and an agreement for another meeting to discuss Global financial oversight for February 09 when Obama is in power.

So, in effect, we will have a New Labour meeting. No new news, just a re-hash of what has already been done and put on in a nice spinny manner for public consumption. Sadly, we all know now how ineffective a means of government this is.

I wonder if they will even get Madelson and Campbell to draft the final speeches?