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G-20 Agrees To Grow Global Economy By $2 Trillion

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Apparently all it takes to kick the world out of a secular recession and back into growth mode, is for several dozen finance ministers and central bankers to sit down and sign on the dotted line, agreeing it has to be done. That is the take home message from the just concluded latest G-20 meeting in Syndey, where said leaders agreed that it is time to finally grow the world economy by 2% over the next 5 years.

The final G-20 communiqué announced its member nations would take concrete action to increase investment and employment, among other reforms. “We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2 percent above the trajectory implied by current policies over the coming 5 years,” the G20 statement said.

Australian Treasurer Joe Hockey, who hosted the meeting, sold the plan as a new day for cooperation in the G20.

“We are putting a number to it for the first time — putting a real number to what we are trying to achieve,” Hockey told a news conference. “We want to add over $2 trillion more in economic activity and tens of millions of new jobs.

And to think all it took was several dozen of politicians sitting down for 2 days in balny Syndey and agreeing. So over five years after the start of the second great depression the G-20 has finally agreed and decided it is time to grow the economy: supposedly the reason there was no such growth previously is because the G-20 never willed it…

There is only one problem: the G-20 has absolutely no idea how to actually achieve its goal of boosting global output by more than the world’s eighth largest economy Russia produces in a year. Nor does it have any measures to prod and punish any laggards from this most grand of central planning schemes. From Reuters:

There was no road map on how nations intend to get there or repercussions if they never arrive. The aim was to come up with the goal now, then have each country develop an action plan and a growth strategy for delivery at a November summit of G20 leaders in Brisbane.


“Each country will bring its own plan for economic growth,” said Hockey. “Each country has to do the heavy lifting.”


Agreeing on any goal is a step forward for the group that has failed in the past to agree on fiscal and current account targets. And it was a sea change from recent meetings where the debate was still on where their focus should lie: on growth or budget austerity.

So who is the mastermind behind this grand plan? Why the IMF of course: “The growth plan borrows wholesale from an IMF paper prepared for the Sydney meeting, which estimated that structural reforms would raise world economic output by about 0.5 percent per year over the next five years, boosting global output by $2.25 trillion.”

The same IMF whose “forecasts” can best be summarized in the following chart (which will be revised lower shortly to account for all the snow in the Northeast US):


Aside from this idiocy, the other topic under boondoggle discussion was the fate of the taper, and specifically how emerging markets will (continue to) suffer should the Fed continue to withdraw liquidity. Here, once again, the developed nations won out, leaving the EMs, and particularly India’s Raghuram Rajan – who has been pleading for far more coordination between central banks in a time of globla tightening – high and dry.


What inflation? As for coordination, here is what the G-20 did agree on: whatever Yellen says, goes:

Financial markets had been wary of the possibility of friction between advanced and emerging economies, but nothing suggested the meeting would cause ripples on Monday. “The text of the communiqué indicates that the standard U.S. line that what is good for the core of the world economy is good for all seems to have won out,” said Huw McKay, a senior economist at Westpac, noting there was nothing that could be taken as “inflammatory” about recent volatility in markets.


There was a nod to concerns by emerging nations that the Federal Reserve consider the impact of its policy tapering, which has led to bouts of capital flight from some of the more vulnerable markets.


“All our central banks maintain their commitment that monetary policy settings will continue to be carefully calibrated and clearly communicated, in the context of ongoing exchange of information and being mindful of impacts on the global economy,” the communiqué read. There was never much expectation the Fed would consider actually slowing the pace of tapering, but its emerging peers had at least hoped for more cooperation on policy.


Hockey said there had been honest discussions among members on the impact of tapering and that newly installed Fed Chair Janet Yellen was “hugely impressive” when dealing with them.

Indeed, in the three weeks that Yellen has been Chairmanwoman, she has been truly hugely impressive. It’s the next three years that may be more problematic.


17 Comments on "G-20 Agrees To Grow Global Economy By $2 Trillion"

  1. ghung on Sun, 23rd Feb 2014 10:58 pm 

    The Growth Monkeys are getting desperate.

  2. shortonoil on Sun, 23rd Feb 2014 11:22 pm 

    It has been the energy provided from the production of conventional crude that has powered global economic growth for the last century. It is now in a state of permanent decline. To even begin to believe that bankers can change the fundamental physical events that are now affecting the world is evidence of how disconnected from reality many people have truly become!

  3. dsula on Sun, 23rd Feb 2014 11:50 pm 

    If the complete non-superfluous industrial output of nations was geared to obtain more energy it would indeed mean much higher GDp and much more energy for quite some time, at a cost of tremendously lowering the standard of living.

  4. Davy, Hermann, MO on Sun, 23rd Feb 2014 11:55 pm 

    Well at least they are talking 2% and not 4% or 5% like the normal spew from the past. I wonder whose growth they are speaking about probably the TBTF establishments and not the poor and unemployed. In any case 2% is negative when you adjust it with inflation and population growth. Yet, not negative for the fat cats who skim their cut off the top so by the time it dribbles down to the salt of the earth people it is basically a stipend out of their meager standard of living. These guys are just greasing their palms as a group of technocrats who’s understanding of the fate of the world is misguided and paralyzed. They are generally under one or another pseudo-science thought call economics. There is no other option besides growth for these guys. I am not sure there is anything besides growth that can maintain the bubble we are in. At this point financially it is all about the central banks and particularly the FED and China. I imagine behind the public show there were some serious discussions on how one keeps the ponzi scheme going. The paramount aspect of a Ponzi scheme is confidence. I imagine there were some worried talk among the gin & tonics and dry martinis.

  5. J-Gav on Mon, 24th Feb 2014 12:09 am 

    Shorton – you’re right on.

    The G-20 has about as much credibility as my grandma would have in an Olympic curling competition.

  6. bobinget on Mon, 24th Feb 2014 12:25 am 

    Increased growth means greater fossil fuel consumption. Greater FF consumption hastens more intense storm activity but most concerning, sever
    droughts leading to unaffordable food stuffs for great
    portions of the world’s populations.

    Evidentially men in suits have decided.
    One sure way to stimulate world economies is to
    prepare for the very climate change being promoted
    by increased economic activity. Humans are caught in this terrible catch 22. Unless we take dramatic steps to
    mitigate climate change we, as society will not survive.

    Infrastructure buildout will be the catch-words for the next decade of preparing to cope with what is now a certainty.

  7. Makati1 on Mon, 24th Feb 2014 12:44 am 

    The money printing presses will be running full out!

    Caution! Crash Ahead!

  8. bobinget on Mon, 24th Feb 2014 12:47 am 

    I’m not making this shit up ya know.
    Recently I read “Windfall” by McKenzie Funk ‘The boring business of Global Warming’.
    Even if you are still denying Causes of GW or maybe
    especially if you find yourself undecided you will find this book riveting.

    For most who make their living investing, some of”Windfall” will be old news, but by no means all.

    There is hardly one major industry in G 20 who do not stand to benefit from true misery we now know as ‘Climate Change’.

    I for-instance did not understand how Insurance companies actually gain from so called ‘natural
    disasters’. How the use of fossil fuels needs to increase
    just to support all advanced economic activity.

    From reading “Windfall” I began to understand how Japan’s economic activity actually went up, post Fukushima.
    WE learn the Dutch are hiring out their below sea level technology. How international construction companies are lining up politicians worldwide to promote
    climate change infrastructure.

  9. Stilgar Wilcox on Mon, 24th Feb 2014 1:20 am 

    It’s the old “We’ll get our way out of this pickle by way of growth”, in spite of ever declining EROEI. Those two forces are diametrically opposed, holding the ship together only by propping up BAU via greater debt, ignoring limits to debt and eventual interest rate rise to save the value of the currency, followed by massive loan defaults, public and private.

    I remember channel surfing sometime back and catching Kudlow on CNBC saying, “I’m telling you, we need growth. Lot’s of growth! If we could just get the government to understand that!!”

  10. PapaSmurf on Mon, 24th Feb 2014 1:29 am 

    Buy gold… or even better, buy gold mining stocks. If they are going to start stimulating economies, that means gold could make another run higher.

  11. rollin on Mon, 24th Feb 2014 4:05 am 

    I am fairly sure inflation will raise the global economy numbers up quite significantly, just before the bubble pops.

  12. Keith_McClary on Mon, 24th Feb 2014 5:40 am 

    Is that a Joe Hockey stick chart, or just a hokey one?

  13. Lucky Luck on Mon, 24th Feb 2014 7:42 am 

    Growth is not the solution for mankind, it’s THE big problem.

  14. Davy, Hermann, MO on Mon, 24th Feb 2014 1:34 pm 

    @bobinget –
    From reading “Windfall” I began to understand how Japan’s economic activity actually went up, post Fukushima.
    This is obviously only from the standard GDP measurements. The measurements will show negative responses and conditions in a positive view point of increase productive action. The reality is of course much different. Natural disasters and long term problems require energy and other productive forces to solve. This increase the appearance of growth. Yet, the overall state of society has been reduced by the reduction of social fabric and infrastructure fabric, and resource reserves. In a non-finite human world described by economist we can use technology and substitution to overcome these challenges and they would see the economic activity as positive. In the real world from a systematic point of view we are throwing good money after bad. When problems are really predicaments we generally make the predicament worse and reduce our capacity to solve other problems. We hit Tainters diminishing returns of limits to problem solving. All systems are finite here on earth and they cycle. The GDP measurement will not recognize the forcing a system undergoes when problems are predicaments and any further problem solving wastes precious resources and generally makes the predicament worse. The unintended consequences of further actions is more problems elsewhere. So the systematic cycle position is pushed up to an unstable equilibrium and of course eventually breaks to a new equilibrium by bifurcation. Because of the chaos created in this bifurcation irrationality and dysfunction will destroy built up social and infrastructure fabric. So at this point in our global economic quest for growth we are in a grand predicament of being damned if you do and damned if you don’t. Further growth forces the system cycle position. If you give up the game of combating entropic decay and problem solving you also force the system by not solving problems. In the end we must choose the better of both negatives to our standard of living. Continue BAU or end BAU which both leading to the same result of a contraction to a much lower standard of living or worse. My argument is give enough time for a bottom up cushion of some type to coalesce with multiple dispersed plan B’s. In addition recognize from the top down that we must have a mass global effort to manage wmd’s, game ending wastes, and strategies that do not destroy local efforts. If enough scientist get the word out on the multiple tipping points just ahead with no way BAU can continue we may see a recognition by the global elite of the importance of these efforts. Since our productive efforts suffer human preference of net present value we will likely not be able to achieve a necessary long term plan and effort.

  15. Hugh on Mon, 24th Feb 2014 3:57 pm 

    This dependence on growth reminds me of a lesson learned when building tree forts as a kid: if the floor is sagging in the middle, levelling it by adding new flooring is a very short-term solution, and the inevitable crash is worse than the original problem!

  16. GregT on Mon, 24th Feb 2014 5:40 pm 

    What better way to grow global GDP, than another world wide war.

  17. Northwest Resident on Mon, 24th Feb 2014 5:55 pm 

    “G-20 Agrees To Grow Global Economy By $2 Trillion”

    Come on, guys. That is wonderful news. They’ve all AGREED to do it. They’ve also agreed to establish a new outpost on a planet in a solar system far, far away to extract that planet’s resources for shipment back to planet earth. And they have agreed to duplicate the anticipated success of that outpost and establish many similar extraction projects on as many planets as they can locate in our galaxy and other nearby galaxies. Guys, they have AGREED!! Therefore, it shall come to pass.

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