The expectations game

GYEONGJU, South Korea (MNI) - The meeting of Group of 20 finance ministers and central bank chiefs ended here Saturday amid claims that real progress has been made on addressing the global imbalances and the spats over currency interventions that have dogged the global economic recovery.

MOSCOW (Reuters) - The Group of 20 nations declared on Saturday there would be no currency war and deferred plans to set new debt-cutting targets, underlining broad concern about the fragile state of the world economy.

Western officials should have realised this Summit would be different when they arrived in Seoul to find their phones and blackberrys didn't work. The problem was that Korea's nationwide 4G network was too advanced. On early negotiating missions, key UK officials found themselves communicating with London via gmail, on rented phones. That was never a problem in Pittsburgh, or Toronto. But as George Osborne liked to point out, this was the first G20 Summit not hosted by a G8 country - and, he might have added, the first where G8 countries didn't call the tune.

The timing of China's exchange rate move is hardly accidental. The Chinese have said they will "increase the flexibility" of the exchange rate "to benefit the domestic economy". But in the very short term, it is in Toronto where the benefits will most clearly be felt.

It looks like the G20 on Friday will emphasize its new “framework” for curing macroeconomic imbalances, rather than any substantive measures to regulate banks, derivatives, or any other primary cause of the 2008-2009 financial crisis. This is appealing to the G20 leaders because their call to “rebalance” global growth will involve no immediate action and no changes in policy – other than in the “medium run” (watch for this phrase in the communiqué). When exactly is the medium run?

Seoul, South Korea: The global economy looks stronger now than it did at the G20 Summit in London last spring. But the will to cooperate looks a lot weaker - and so does President Obama.  

The Bank of England's most consistently interesting economist had some bad news today for anyone worried about the problem of global imbalances. He thinks that those current-account imbalances are likely to get bigger, probably a lot bigger, in the next 10 to 20 years - and there may not be very much that anyone can do about it.

Seoul, South Korea: Mervyn King has a very clear idea of what should happen at the G20 meeting in Seoul over the next two days. He's a lot less certain about what will happen in the UK.