China Warns Against Finger-Pointing; Obama Points Finger Anyway; Obama's Budget Reduction Lies

On Thursday, ahead of the G20 summit, China warns against finger-pointing.

Finger-pointing at the G20 will be self-defeating for an international forum that should be focused on coordination, not criticism, of economic policies, a senior Chinese government official said.

Underlining the extent to which China wants to shield its currency policy from censure, a second official said that the Group of 20 summit in Canada on June 26-27 was not the right place for discussing "the yuan issue."

China: yuan exchange rate of no concern to others

The finger-pointing warning was explicit enough, but China followed that warning with an even bolder statement on Friday: Yuan exchange rate of no concern to others

The main focus of China's currency policy is the well-being of its people and any adjustment to the exchange rate is not the concern of other countries, government officials said Friday ahead of President Hu Jintao's trip to next week's G-20 meeting.

The gathering in Toronto should focus on the European Union debt crisis and ways countries can cooperate to ensure strong and sustainable economic growth, Vice Finance Minister Zhu Guangyao told reporters.

"The renminbi is China's currency and this is not an issue that the international community should discuss," Vice Foreign Minister Cui Tiankai told reporters.

Obama's Letter to G-20 Leaders

Inquiring minds are reading the Letter from the President to G-20 Leaders.

A strong and sustainable global recovery needs to be built on balanced global demand. Significant weaknesses exist across G-20 economies. I am concemed by weak private sector demand and continued heavy reliance on expolis by some countries with already large external surpluses. Our ability to achieve a durable global recovery depends on our ability to achieve a pattern of global demand growth that avoids the imbalances ofthe past. In Pittsburgh, we agreed that countries with extemal surpluses would need to strengthen domestic sources of growth. Leaders and governments will need to decide for themselves how to achieve that objective. In some countries, strengthening social safety nets would help boost low levels of consumption. In others, product and labor market reforms could strengthen both consumption and investment. I also want to underscore that market-determined exchange rates are essential to global economic vitality. The signals that flexible exchange rates send are necessary to support a strong and balanced global economy.

We need to commit to fiscal adjustments that stabilize debt-to-GDP ratios at appropriate levels over the medium tenn. I am committed to the restoration of fiscal sustainability in the United States and believe that all G-20 countries should put in place credible and growthfriendly plans to restore sustainable public finances. But it is critical that the timing and pace of consolidation in each economy suit the needs of the global economy, the momentum of private sector demand, and national circumstances. We must be flexible in adjusting the pace of consolidation and learn from the consequential mistakes of the past when stimulus was too quickly withdrawn and resulted in renewed economic hardships and recession. For our part, we will pursue measures to SUppOit the recovery in private demand and return the unemployed to work. At the same time, we recognize the impoltance of setting a credible medium-term fiscal path: that is why my Administration will cut the budget deficit we inherited in halfby FY 2013 and work to reduce our fiscal deficit to 3 percent ofGDP by FY 2015, which will stabilize the debt-to-GDP ratio at an acceptable level in that year.

I know how easy it is to make typos as they sometimes crop up in my blog, but from the President of the United States who should have a proofreader, that was rather embarrassing.

I was shocked that the amazing number of typos in those two paragraphs. I did not check the rest of the article.

Obama Points Finger at China

Typos aside, Obama clearly pointed the finger at China with the sentences "I also want to underscore that market-determined exchange rates are essential to global economic vitality. The signals that flexible exchange rates send are necessary to support a strong and balanced global economy."

Yet, China has already made it clear it does not give a damn what anyone thinks. It will be interesting to see how Congress reacts.

Obama's Budget Reduction Nonsense

Does anyone find Obama's claim to cut the deficit in half by 2013? I suggest the odds are about 1%. Also note the clever way he laid the deficit blame on Bush, claiming he inherited the deficit. I Excuse me but he tripled Bush's deficit.

From the Congressional Budget Office courtesy of the Foundry, please consider Budget 2011: Past Deficits vs. Obama�s Deficits in Pictures

The President is apparently arguing that his trillions of dollars in additional deficit spending are needed to �invest in areas that will determine our economic success in this new century.�

This is statement goes to the core of the fundamental difference between leftists and conservatives in this country: liberals belief economic growth comes from wise investments by government experts; conservatives believe that economic growth stems from millions of Americans having the freedom to make their own economic decisions every day.

President Obama�s bailouts, massive stimulus spending, and other dangerous interventionist policies (some of which began in 2008) have made Americans less economically free. The 2010 Index of Economic Freedom analyzes just how economically �free� a country is, and this year America saw a steep and significant decline, enough to make it drop altogether from the �free� category, the first time this has happened in the 16 years we�ve been publishing these indexes. The United States dropped to �mostly free.� As the Index shows, lack of freedom has a direct, negative effect on job growth. It should be no surprise that President Obama�s policies have taken us down the path to fewer jobs and record deficits.

In case you did not know it before, Obama stepped up to the plate and proved in no uncertain terms he is a Keynesian fool of the greatest magnitude. In the short-term he wants bigger deficits in the absurd belief (or election lie - take your choice) that somehow bigger deficits now will help balance the budget in the medium-term.

However, the one thing we have learned from Keynesian clowns is the "medium-term" never comes.

Japan is a perfect example. Japan has has round after round of fiscal stimulus and nothing to show for it but debt to the tune of 200% of GDP.

For more on the debate regarding fiscal stimulus, please see Krugman vs. Greenspan on "That �30s Feeling"; Calculated Risk Sides with Krugman, I Side with Greenspan.

President Obama wants to make sure the "recovery" is not derailed. However, there is no recovery, only an illusion caused by ridiculously unsustainable government spending.

Europe seems to have figured this out.

Incurable Keynesian clowns in the US are hopelessly behind the curve.

Krugman's Magic Mirror





Please see Paul Krugman's Magic Keynesian Mirror for continued discussion.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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