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The official theme of the G20 meeting is “restoring global growth.”

The world economy has sputtered since the 2008 financial crisis and global recession that followed. Progress in returning economic growth to pre-crisis levels has been hampered by austerity policies in Europe, and high unemployment in the U.S. in addition to dismal growth which remains below the rates needed to get people back into work.

At the meeting of G20 Finance Ministers and Central Bank Governors which concluded on February 23, China and the US engaged in a vigorous debate on China’s economic reforms. Before the meeting, American Treasury Secretary Jack Lew had criticized China for its failure to show any signs of accelerating economic reform in line with U.S. expectations, and called for China to speed up reforms though facing the risk of social and political turmoil.

The U.S. of course accuses China of having financial problems and putting the ‘Global Economy’ at risk.

Chinese Finance Minister Lou Jiwei responded in kind by pointing out that the US had not engaged in any structural reform either, but had revitalized its economy by printing money. China stood up to the U.S. bullying and told the truth about the U.S. economy and the printing press of the Federal Reserve.  They said the U.S. was living off printed money and the U.S. economy was fake and there was nothing really backing the ‘prosperity’ of the U.S.

Lew wrote to G20 members voicing his concerns about bad debt in the Chinese financial system, which may threaten the global economy. Lou Jiwei responded that China’s shadow banking problem was less serious than western economies, since China’s shadow banking was still connected with the real economy; while the shadow banking products of western economies, such as CDS (credit default swap), have nothing to do with real economic activity.

Zhou Xiaochuan, governor of the People’s Bank of China, emphasized at the meeting that the Chinese government is carefully monitoring the level of risk in existing economic operations. For the time being the scale of China’s shadow banking is still small, but it is developing fast and the relevant authorities are watchful. Zhou pointed out that a 7 percent to 8 percent GDP growth is well adapted to China’s needs, and also helps global economic growth.

China obviously knows the U.S. is running on fumes and was not going to stand for the U.S. trying to bully them.  The U.S. is going down in stature in every respect. 

Can’t argue with China about that.

Money isn’t backed by anything other than “public confidence” which assumes it has value. If and when public confidence collapses, the currency will collapse with it.

And the US – like the UK – has no real manufacturing base these days as they’ve transferred it to cheap labor countries.

According to Lou Jiwei, China is currently focused on lowering the inflation rate and promoting employment, so as to improve the quality of GDP growth. The international community expects China to continue in its role as the global economic engine and contribute over 50 percent to global economic growth as in 2009 and 2010, but such levels of growth are unsustainable. Problems like environmental pollution and excess production capacity would be the inevitable results. China presently contributes almost 30 percent of global economic growth, while its economy represents less than 10 percent of the global economy. It is unreasonable to ask China to contribute half of global economic growth.

G20-Major-Economies-Agree-to-Fast-Track-Global-GrowthThe G-20 combines the world’s major industrialized and developing countries from the United States to Saudi Arabia and China, representing about 85 percent of the global economy.

The G-20 said it would “significantly raise global growth” without overtaxing national finance through measures to promote competition and increase investment, employment and trade.

As an initial step toward achieving the $2 trillion target, each country will present a comprehensive growth strategy to a summit of leaders scheduled for November in the Australian city of Brisbane.

In December, the US Federal Reserve said it would start cutting back on the amount of bonds it buys in each month as the economy tries to strengthen.

obama drugsLike a drug dealer pushing crappy dope, the US has been buying bonds to try to keep cheap money flowing around the economy. The Federal Reserve’s recent decision to begin scaling back its monetary stimulus jolted global financial markets, particularly stocks which benefited in the past several years from record low interest rates and money created by worthless bond buying.

The meeting didn’t make any specific commitments to helping developing nations manage volatility in their financial markets stemming from the Fed’s stance. It said G-20 nations should consistently communicate their actions and cooperate in “managing spillovers” to other countries.

The G-20 members are Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, South Korea, Russia, Saudi Arabia, South Africa, Turkey, the U.S. and the European Union.