G20 Summit Final Communique.

(02/04/09) Today the G20 Summit, London broke up with the release of the final communique. I haven't had time to fully digest the document or read it's several appendix but a quick glance reveals two very interesting things;

1. Fiscal Stimuli: When the G20 summit was announced back in November 2008 Gordon Brown heralded it as an opportunity to enact the largest, co-ordinated fiscal stimulus in the history of the world. In the final draft the term "fiscal stimulus" appears only once. All previous stimulus measures are now referred to as "expansionary policies" and there is a resolution to put in place credible exit strategies for existing measures. This is a diplomatic way of saying that the world is now looking for ways to undo Gordon Brown's economic policies.
2. $1.1trillion for the IMF: The centre-piece of the communique is the announcement that the 20 will boost funding to the IMF to a massive US$1.1trillion. However when you break down that figure it is actually;

• $100bn from the sale of gold. Basically transferring an existing IMF asset from one form to another.
• $250bn in credit guarantees. Not actually money as it will only be required in the event that an international transaction defaults.
• $250bn in drawing rights. Again not actual money just a change in the way existing money can be accessed.
• $500bn in extra funding. This was the original figure touted before the summit and will be made up by USA($200bn), EU ($100bn), Japan ($100bn), Saudi Arabia ($60bn) and China ($40bn).

When you look at it like that it appear the G20 leaders have come up with this massive figure to grab headlines. This makes it look as though the worlds stock markets have risen because of bold political leadership when in reality the markets rose because the G20 broke up without achieving very much at all.