LONDON — As the world's leaders meet here I've been observing events around town and jotting notes back to my editors in Boston — in other words, covering the summit in real time from the ground up. We'll be collecting these short hits here throughout the day, as well as posting them to my Reporter's Notebook.
The summit is over.
The headline is staggering: the G20 has committed itself to $1.1 trillion of stimulus for the global economy via increased resources to the IMF, and support for trade initiatives. But after the headline comes the Kremlinology, because the details have yet to be divulged and everything depends on interpretation.
British Prime Minister Gordon Brown, host of the event, faced the press alone to announce the agreement, so let's work through his speech:
He began by noting that there are no quick fixes, the hope is that this package will shorten the recession.
Interpretation: things aren't going to turn around until 2010 but be patient.
The first detail he mentioned was a reform of banking regulations. Hedge funds will be regulated for the first time and the shadow banking system will be exposed to sunlight. He also said credit rating agencies are to be regulated in future as well.
Interpretation: By mentioning this first he acknowledges France and Germany's requirement that there be no stimulus without serious reform.
No details on regulations and your correspondent did not get to ask his question, but it will be interesting to see if international regulations are passed by individual nations. Right now in the U.S. and U.K., public opinion would like nothing better than tighter regs but a year from now ...?
Next: Global approach to toxic assets — no need to interpret this. Look for the whole world to put toxic assets into the bad bank.
Then: Trebling the funding of the IMF to $750 billion, plus creating a special drawing right fund and $100 billion for multi-later development banks (did you know these things existed?)
But this funding is not happening overnight. It will take place over the next 18 months. "By the end of next year" was Brown's exact phrase ... but how many of the leaders attending the G20 will still be in office in 18 months? Brown himself may be gone.
In addition, all the money pledges to IMF means new governance of that body as well. Appointments to its senior management will be based solely on merit.
Interpretation: China will have more say in the running of IMF ... or does it? Japan pledged $100 billion to the fund, so did the E.U. China came up with $40 billion. Asked to comment by a Chinese reporter about a seat at the table, Brown said many countries had contributed to the IMF ... the implication was that all were entitled to consideration in the organization's management. In other words, given the opportunity to single out China for praise, he ducked.
For me the most interesting initiative involves the IMF selling some of the gold it holds to create a special fund for the world's poorest countries. These nations are so poor that they cannot afford to borrow money from the IMF at any interest rate. It was a specific proposal ... it will be very interesting to see how long it takes to get specifics on the other proposals.
Anyway, those are the benchmarks. Another summit will be held later in the year. Let's see how many of regulations are in place and whether the global economy is starting to turn over again.
We're all packed in to the drafty ExCel. It holds more than 10,000 usually but it is a ghost town right now with the heads of government behind many closed doors, and the 2,500 accredited journalists in two vast exhibition halls.
No spinning going on so the press conference due imminently will have real news for us.
I spent part of the last hour trying to chat with colleagues from China's Xinhua news agency. In a friendly way I was curious to know what they thought might happen in the final communique ... not a lot of free conversation there, although the Chinese delegation has published a summary of its"External Financial Cooperation Since the Outbreak of the International financial Crisis."
Since the first of March it has done currency swaps with Belarus, Indonesia and Argentina totaling 190 billion yuan renminbi (around $28 billion).
I cannot claim to understand what the currency swap agreement details are and my Xinhua colleagues had no idea why I was asking them.
The Chinese handout also included the fact that in December it did a trade finance deal of 8 billion dollars with the U.S.
En route to the remote and inaccessible ExCel center, site of today's G20, I stopped off at Canary Wharf, London's new financial district, to see how today's discussions were being received in the place that, along with Wall Street, is so closely identified with the global financial crisis.
The last time I visited was the autumn. Lehman Brothers was gone but the bank bailout was in place and Canary Wharf hummed with energy. Not today.
As I walked out to the street from the train station a cab driver waved at me hopefully with a smile, not a gesture in happier times for the likes of me. I walked over, he asked where I wanted to go. When I told him nowhere, and started asking how business was, he made me for a reporter and continued chatting. He had nothing better to do ... and has had nothing better to do since before Christmas. Thousands of jobs in the high-rise homes of the big bank trading floors went bust at the end of last year.
The emptiness was exacerbated today by a lingering worry that anti-globalization protestors, unable to get close to the G20 summit would visit Canary Wharf instead for a bit of aggravation.
I found out this out when I walked to an outdoor Starbucks by Cabot Plaza on the other side of the complex. A young woman named Kat was getting a round of lattes in and was shivering in the early spring chill. I asked her if everyone was glued to the news watching reports of the summit. "No," she said. Most people in her office had been given the day off. Why didn't she take the day, I asked. "My boss would get mad if I did."
Five months ago outside this Starbuck's there were dozens of traders and merchant bankers most willing to talk to a reporter and give a name. Today I found two, they had provocative stuff to say, but were unwilling to say it on the record. They confessed they were paying no attention to the G20. There was nothing that was happening at the meeting that had anything to do with them.
One steered me to the Daily Mash website. He said it made a good point today: "Bankers are smarter than politicians, they can find their way around any regulations they put on in place." The thing is that the Daily Mash was making a joke ... the two bankers who wouldn't give me their names were deadly serious.
With the G20 meeting as we speak to dot i's, cross t's and perhaps add a zero or two to the pledge pot, the big question around the hall today at ExCel London is this:
Will it work?
Who'd have thunk it: Economics isn't the dismal science after all. It's the dismal guessing game. Most of the professional guessers on Wall Street and in the City of London got it wrong. A few in America got it right, most famously NYU professor Nouriel Roubini.
Britain's own Dr. Doom is a member of parliament: Vince Cable, deputy leader of the Liberal Democrat party and their spokesman on all treasury matters.
Cable got his reputation stating the glaringly obvious: House prices don't go up at a rate of 15 percent per year forever — and too much of Britain's economic growth in the five years prior to 2008 was based on consumer confidence created by the housing bubble. He warned a mortgage institution bank would collapse shortly before Northern Rock, a small regional mortgage insitution that had ingested the steroids of Credit Default Swaps, went bust. But there is more to his reputation than that. As a former chief economist of oil giant Shell, Cable also had a better idea of the way stock markets interact with with commercial enterprises in valuing companies.
He saw the dangers to businesses in the trading shenanigans going on in the "light touch" regulated City of London and spoke out for years against the casino games being played in the shadow banking system. When the house of cards came down, Cable, like Roubini, became an infallible oracle so I called him up to find out what he thought about the summit and the prospects for the global economy.
"Well, something will come out of it (the summit)" he told me. "It's not the meeting itself, it's that the leaders will find something to agree on and show a unified face."
The most likely area for agreement relates to beefing up the International Monetary Fund in terms of money and changing its organizational structure. This means China will be given a role in IMF decision-making. The other will be a strong pledge to avoid slipping into the trap of nationalism. Cable acknowledges this is easy to agree but may be hard to maintain in the face of domestic pressure.
Referring to the British government's bailout of the country's biggest bank, Royal Bank of Scotland, Cable points out, "People have to deal with reality as it is. The Royal Bank of Scotland was saved by the British taxpayer but it is a global bank. it will continue to lend money abroad."
Cable is uncertain whether that idea could be sold in Britain or America. He notes that following a brief period of unity born of panic when Lehman Brothers collapsed normal partisan politics has resumed in Washington and London. He scolds all sides for giving in to such pettiness. The bickering underscores a fundamental roadblock to fixing the world's economy. "We live in an era of globalization but our politics are national and politicians set the rules and they want to be elected." Which means playing to nationalist sentiment.
I asked him to peer into his so far frighteningly accurate crystal ball for what will happen once the summit-eers head home. If you have tears to shed, prepare to shed them now.
"The next twelve months will be downhill and frightening," Cable says with quiet certainty. "We haven't got through the first phase of the crisis. There will be more financial institutions going down. There is a question whether the remedial measures thrown at the crisis will work."
Is anything good and lasting going to happen out of this meeting then? "If the Chinese are locked in to close cooperation, that would be a valuable achievement."
Well, there's a comfort.
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