The acrimony at the G-20 is more than even I expected after the preliminary round in late October. Political leaders are trying to assuage feelings and massage the message but even U.K. Prime Minister David Cameron has said this is not the G-20′s finest hour. Heated words were/are being exchanged about how to resolve global imbalances and restructure the entire global economy to prevent future imbalances from wreaking havoc on economic growth. Secretary Geithner even went to the airwaves to criticize Alan Greenspan for suggesting that the U.S. was deliberately depreciating the DOLLAR.
Sir Alan had a piece in the Financial Times Wednesday pointing an accusatory finger at the Treasury and China. Ill will is the theme of the day and more was added to it by Frau Merkel, who in a statement about the Irish BOND situation, sounded as if she was running for the Senate seat in Kentucky. While at the G-20 summit, Merkel found the time to say this about the PIIGS and their DEBT:
“Let me put it quite simply: In this regard there may be a contradiction between the interests of the financial world and the interests of the political world. We cannot keep constantly explaining to our voters … Why the taxpayer should bear the costs of certain risks and not those people who have earned a lot of money from taking those risks.”
These words from Merkel could easily have emanated from Rick Santelli, whom we admire, for this is the backbone of the TEA PARTY origination. I have been adamant throughout the year that the European situation would be very problematic when the good Bavarian Burghers grew angry about having to bail out the profligate ways of the peripherals. Merkel’s statement reveals that the domestic situation in Germany is very unsettled about EUROPEAN debt relief. As the situation in Ireland worsens, Portugal is struggling with the pain of high interest rates and today the Spanish and Italian debt markets got battered. The differentials on all of these 10-year bond spreads widened to the highest levels since the advent of the EURO in 1999.
Beside all the stress in the European credit markets, the continued finger-pointing, and blame laying, the Russians threatened retaliation at the U.S. over a high-level double agent that revealed the spy ring that U.S. officials uncovered in the spring. The markets are very nervous as so much was promised from the G-20 Sherpas going into this meeting. South Korea wanted to present a good face for the meeting’s outcome but that becomes more difficult by the hour. After the meeting adjourns and the communique is issued, the G-20 leadership will pass to French President Sarkozy, a JOIE DE VIVRE.