Is this agreement:

[loosecannon]

>meaningful, substantive?

>one with teeth?

>a poseurs compromise/save face/MAS gimmick?

>gonna solve the debasement wars, rare earth sanctions, tariff wars that have been beginning to brew?

>is it a sell out by any particular party?

I have no idea, I read earlier it got watered down, then it was suddenly agreed upon. Will it work? Or will China keep the peg anyway?

G-20 powers agree to Geithner currency and trade plan

Finance ministers from the world's major nations agreed to a U.S.-brokered plan for easing tensions over exchange rates and world trade patterns, saying that a "fragile and uneven" economic recovery was at risk if top powers pursued conflicting policies or used the value of their currencies to gain an edge for their exports.

Aiming to head off what some have dubbed a developing "currency war," the statement from the finance leaders of the Group of 20 nations was a carefully worded bargain across a range of issues. It put China on the record as seeking to bring down its massive trade surplus and let its exchange rate fluctuate more. It also hinted that any move by the U.S. Federal Reserve to further ease monetary policy would be measured so as not to disrupt currency values or capital flows in emerging market nations.

Although the core ideas are not new ones for the G-20 - previous statements from the group have promised similar commitments to flexible exchange rates, for example - the accord crafted over two days of talks in South Korea represents a tangible step. The group agreed as it has before that "excessive imbalances" in trade and other relationships should even out over time - requiring countries such as China and Germany to rely less on exports for their economic growth - and the members pledged for the first time to submit to an agreed-upon procedure for measuring progress.

The methods of measurement are still to be developed, but the language marks a potential turning point as the G-20 struggles to ensure its agreement over broad principles translates into action. U.S. officials say they intend to push for more detail, including possible timeframes and numerical targets, as the work of the finance leaders is submitted for approval by the G-20 heads of state who gather in South Korea next month.

The plan envisions

washingtonpost.com

Anybody getting a Copenhagen Summit head rush?

 

[william the wie]

This is a crock. I checked some news today earlier when the board was dead. It turns out that an economist named Schilling managed to pull off one of the two revisions needed to make the Case-Shiller housing index more accurate. By dividing housing costs by sq. ft. to get to an inflation adjusted housing number he demonstrated the high probability of the housing bubble having reached a peak at least 25% higher in real terms than previously estimated. (Not a quote but my own calculations based on the statements he made to CNBC in a 2 minute interview.)

If the world is on track for $150 T deflation for writedowns from the US alone then this may become quite interesting. My own guess is that when an amenities adjustment is made to Case-Shiller that it will turn out that the bubble peaked 500-1000% above trendline and housing will have to decline 80-90% in price to get to trendline and will dip way below trendline before stabilizing. Under these circumstances the G-20 communique is yesterday's news at best.

 

[loosecannon]

$150 trillion deflation for writedowns?

I dunno if the whole world's money supply is that high. That is right around the mark of the whole world's wealth right?

 

[Oddball]

If anybody agrees with Geithner, I'll do the opposite.

Besides that, every time OPEC has got together to try and fix prices, one or more members always cheat and deliver more than they say they would.

Never trust authoritarian stooges in large groups.

 

[william the wie]

$150 trillion deflation for writedowns?

I dunno if the whole world's money supply is that high. That is right around the mark of the whole world's wealth right?

close to it. Cash injections have a multiplier of about 15. Asset write downs come straight out of capital so they have a highly negative multiplier. How negative is a matter of debate -225 would be the theoretical limit with an injection multiplier of 15 but that does not concur with reality. It is more likely in the -25 to -50 range.

Real estate crashes are extremely painful. Coolidge and Hoover kicked the 1926 real estate crash results forward into 1931 but then the hamster died and it all came undone. The post Crimean war US agricultural land bust was perhaps the proximate reason for the Civil War. Land prices dropped like a rock after the peace treaty allowed Russian wheat ships to again use the Bosphorus and they stayed down until the Russo-Turkish war broke out in 1878.

Total Assets in an economy should equal GDP/real risk adjusted interest rate. At the height of the boom the US had a "market" value of up to $750 T. If 6T of bank loans backing real estate and businesses go poof then 6T of somebody's money that would have been lent out at a large multiplier also goes poof. The yield on the money that is left will be lent out at higher risk adjusted rates thus dropping the value of the remaining assets. Banks are forbidden by law to lend more than their capital to any one borrower so loss provisions reduce maximum loan size as well so maximum financial leverage is reduced. A vicious cycle that reduces economies of scale, scope and network can also be established. That in turn feeds back into overseas suppliers who end up with the same problem.