G20 Whacks the US & ABC News did it!

G20 “Wordsmithing”

I was hoping for some fireworks this weekend at the G20. I thought that this would be a perfect opportunity to roast our boy, Ben Bernanke. At this point in history the question, “Is US monetary policy contributing to global political instability?” has been asked and answered. The answer is “yes it is”. The only question is to what degree. I was expecting that this issue would be put on the table rather firmly by the economic leaders of the world. That didn’t really happen. Or did it?

The wording of the final communiqué (they spent most of a night drafting “acceptable” language) has some words that seem to be directed at Ben/ the USA: (Note: I edit out some the verbose language. Full text here)

We stressed the need to reduce excessive imbalances.

Interesting. This sounds like it is (as usual) directed at the Chinese. The G20 agreed to come up with specific targets regarding those “excessive imbalances”.

We agreed on a set of indicators that will allow us to focus on those persistently large imbalances which require policy actions.

Very interesting. What is suggested is that there will be names and numbers established as to who actually has these “excessive imbalances”. This information is supposed to be made available at the next G20 in April. The G20 gives a hint on who will be on that list. The first category is:

(i) Public debt and fiscal deficits; and private savings rate and private debt.

That category has little to do with China. This is directed squarely at the USA. The second category appears to be pointed at the Chinese:

(ii) and the external imbalance composed of the trade balance and net investment income flows and transfers.

What the grunts at the G20 argued about for 12 hours is which would come first (i) or (ii). A shot at America, or a shot at China? America came first.

Both (i) and (ii) were mushed together with this:

Taking due consideration of exchange rate, fiscal, monetary and other policies.

To me this suggests that the G20 is equally upset with the US and China. China’s exchange rate policy now ranks the same as the USA’s fiscal and monetary policies as disruptive "excessive imbalances". As well it should.

No one really cares about the G20 meeting and their limply worded communiqué. But it would be a mistake to ignore these signals. Over the next few months we will see more of this. The leaders of the world will be pointing their finger at the US for the problems that are exploding. The “excess imbalances” of fiscal and monetary policy in the USA will trump the exchange rate abuses of China.

Whether this is right or wrong is irrelevant. It's going to happen. When it happens, this stink will force a change in US monetary policy. (the fiscal side can’t be fixed short-term). In my view this means that QE3 is dead on arrival. If Bernanke tries to play this card the world will rise up against him. Obama will have no choice but to agree. If he wants to retain his role as a world leader.

Want some proof of this thinking? Down toward the bottom of the communiqué was this.

5. We discussed concerns about consequences of potential excessive commodity price volatility and asked our deputies to report back to us on the underlying drivers and consider possible actions.

There are many causes of the commodities price explosion that we are witnessing. At this point it is impossible to not include US monetary policies as a contributor. There will be a report out to that effect before the next G20. That’s in April. Not so long at all. Interesting to me is that this is exactly the time frame that Bernanke MUST give us some information on his next policy step. His hands will be tied.

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ABC Done Hosni In??

I have been blaming Ben B for a fair portion of the problems in the Arab world. He deserves some heat. But so does ABC news.

That Hosni Mubarak and his family looted the till in Egypt is a surprise to no one. The question is, “How bad was that rip off?” In the early days of the crisis in Cairo information came to light that the amounts involved could be between 40-70 billion dollars.


I was staggered by this information. It implies that Hosni is worth more than Bill Gates (57b) and Warren Buffet (45b). This was not some feathering of the family nest. The suggestion was that this was the crime of the century. The prior record was Madoff, but that was only $20b. No wonder the crowds went wild. This comes to nearly $1,000 per person. It is twice the entire external debt of the country.

So where did the estimate of 40-70b come from? ABC News. They did it on 2/2, very early on in the Egyptian crisis:

I have been waiting for some confirmation of this story. There has been none. The ABC News story is not correct. On Friday the Swiss government released information regarding the holdings of the Mubarak family holdings in Swiss banks. The report was oddly worded (typical Swiss obfuscation): (WSJ 2/20/2011)

ZURICH -- Switzerland has frozen tens of millions of Swiss francs in assets belonging to members of the former Mubarak regime in Egypt.

Bern said late Friday that it had blocked "several dozens of millions of francs" belonging to figures associated with former Egyptian President Hosni Mubarak

Two things on this. (1) When the Swiss say it is “several dozen million” they are talking about an amount that is less than $30mm. (2) While it is likely that additional money will be found in Swiss banks, it is not going to take the total up by a big amount. The Swiss government has this number to the penny, there will be no significant surprises. If the Mubarak money in Switzerland is less than $50mm there is no way the total could add up to $70b.

The most significant clarification comes from non other than ABC News. Their top investigative reporter, Brian Ross had this to say on 2/11:

I can tell you from personal involvement that Ross is an SOB, he also gets his numbers right. The initial reports by ABC on 2/2 were way out of line.

Would it have mattered if at the beginning of the crisis in Egypt that information on his wealth outside the country were accurately reported? Maybe. I think so.

You hear a lot of criticism about the financial blogs. That there is information that has not been properly vetted. The funny thing is that this criticism always comes from the mainstream media. Nothing could be farther from the truth. In the case of Egypt, ABC’s faulty reporting contributed to a change in government.