Protests had rocked international meetings in Seattle and Genova. The anti-globalisation movement and allied groups were making their voice heard.

When a protest was organised in the city of London, I went to have a look.

I wanted to see what a riot in a western country was like, and how the police will deal with it.

I was not disappointed. The rioters caused a couple of millions pounds of damage to the Natwest tower and the police were surprisingly hands off. Nobody was shot!

I spoke to a couple of the young protesters. A lot – not all – seemed very naive. A lot of what they were protesting for would hurt developing countries. Things like farm subsidies.

Why were they not protesting against multi-national corporations – that do business globally – listing and registering and therefore paying tax – in developed countries only.

A large part of the protest just seemed to be a venting of frustration at a society where individuals were subjected to endless rules and regulations. Where life is just too easy and not a little boring. It was an occasion to let a little bit of hair down. A mock battle to remind the kids that they are alive.

I attended one more protest in Oxford street. The police contained any possible damage very successfully by illegally surrounding and effectively detaining the protestors.

That was the last protest I saw.

When September 11 happened the world’s focus shifted away from the global economy and poverty to a bogey war on terror. Not that Islamic terrorism is not a threat. It’s just not really very important in the bigger scheme of things.

But the credit crunch changed all that.

How the world works and is structured is back on the agenda big time. And that is great news.

But protesters are back as well. Now they were always a broad church this lot. Not all are career trouble makers or contrarians. And most of them have laudable ideals, even if many are clueless and overly romantic and simplistic in their views.

Last night Mhambi was in the Dove on Broadway market and got handed a flyer by an old guy that not only resembled but also had that nasal twang of ex London mayor, Red Ken.

The flyer is funny, it invites all to congrugate at 4 points on April the first.

On 1st April at 11 a.m. parades will join up at four railway stations around the edge of the square mile – Liverpool St, London Bridge, Cannon St and Moorgate – and snake their way though the City to converge at the Bank of England for 12 noon.

Each procession will be headed by one of the Four Horsefolk of the Apocalypse, commanding their forces against:

1) Climate chaos (Green horse, Liverpool St); 2) War (Red horse, Moorgate); 3) Job/savings/pensions losses (Silver horse, London Bridge); and 4) Home repossessions (Black horse, Cannon Street).

G20 Meltdown calls for as many people as possible to join us for Banquet at the Bank, bring food, fun and games to share – a very rare delicacy will be served, bankers brains! If you want to Eat the Bankers join the Silver horse in a zombie block!

To top it all off. None other than Barack Obama will arrive in London that morning. That is together with other world leaders of the G20.

As the A team’s leader would say, “I love it when a plan comes together”. I predict a riot.

I’m not a genius either. Weeks ago London’s top police officer has warned that this could be a summer of riots.

With bankers like Sir Fred, and the derivatives department of global insurance giant AIG walking away with millions after ruining their institutions and part of the world economy – there will be much sympathy for the protesters this time round.

Kameraad Mhambi will be there.

Read more about the day G20 meltdown in the city here. And follow them on Twitter here.

Related deployments:

1. The summer of discontent

When I read another brilliant piece by Martin Wolf during my Christmas holiday break in Spain I knew I was reading something significant.

It’s weird how one learns a lot about something we take for granted, when it breaks down and dumbfounded commentators pick up old text books on how the economy actually works.

Kameraad Mhambi has been absorbing economic theory of late. It’s fascinating. It’s terrifying.

That were in the biggest economy upheaval since the second world war has become fact.

We reached the point where even arch free marketeers begrudging accept that without government protection of large banks the world would be facing an economic nuclear winter.

Some financial gurus are calling for governments to nationalise banks completely now so as to insure enough lending – essential to economic activity – is maintained.

And of course governments are talking about ‘quantitative easing’ or so-called helicopter theory. An emergency tactic whereby central banks splurge cash to get people spending again. Martin Wolf explains how that works behind this link.

But this is not what worries me. Lets presume with or without nationalisation governments manage to save the banks and maintain lending. Let’s say that vasts amounts of capital is injected in economies and consumers actually use it to spend, and not to save.

Everything will be fine? No.

Yesterday I listened to the radio as news broke of ever wider wild cat strikes breaking out over the UK. The strikers mantra? British jobs for British workers.

We face a situation where the open world economy is under a high risk of ever tigther spasms, eventually to choke. Why?

Kameraad Mhambi has been listening and reading to a number of economic commentators over the last few weeks. Most persuasive of the all has been Martin Wolf. Where Robert Peston is wonderfully didactic, Wolf is just ominous.

“To understand this, one must understand how the world economy has worked over the past decade. A central role has been played by the emergence of gigantic savings surpluses around the world. In 2008, according to forecasts from the International Monetary Fund, the aggregate excess of savings over investment in surplus countries will be just over $2,000bn.”

That is more than 7 times the market value of all goods and services produced or rendered (the GDP) in South Africa for 2008. A number which came to $283bn.

“The oil exporters are expected to generate $813bn. Remarkably, a number of oil-importing countries are also expected to generate huge surpluses. Foremost among them are China ($399bn), Germany ($279bn) and Japan ($194bn). As a share of gross domestic product, China’s current account surplus is forecast at an astonishing 9.5 per cent, Germany’s at 7.3 per cent and Japan’s at 4 per cent. In aggregate, the oil exporters, plus these three countries, are forecast to generate 83 per cent of all surpluses.”

Both Germany and China have surpluses of savings over spending larger than the entire South African economy.

Wolf notes that these countries accuse others of profligacy:

“But it is impossible for some countries to spend less than their incomes if others do not spend more. Lenders need borrowers. Without the latter, the former will go out of business.”

Who are the borrowers? In 2008 they were mainly the US, Spain, the UK, France, Italy and Australia.

“The US is far and away the biggest borrower of them all. These six countries are expected to run almost 70 per cent of the world’s deficits.”

For Wolf the most interesting feature of the global imbalances has been the corresponding pattern of local (domestic) financial imbalances. This is because:

“The sum of net foreign lending and the government and private sector financial balances must be zero.”

Foreign lending does not happen if a country has enough excess money to fund its needs.

First housing booms helped make huge household deficits possible in the US, the UK, Spain, Australia and other countries. House buyers needed cheap money. It came from outside their borders.

But during recessions, the private sector retrenches and the government deficit widens as the government spends more on social security and gets less tax income.

Currently government deficits in countries like the UK are exploding. This is because,

“businesses uninterested in spending more on investment than their retained earnings, and households cutting back, despite easy monetary policy”.

In other words, businesses are not investing, people are not buying stuff, despite the government lowering interest rates. Tax receipts are falling. On top of this governments have to pay benefits and social security for a larger number of people. Explosion.

But this explosion of government money is not good enough.

“Even so, deficits have not been large enough to sustain growth in line with potential. So deliberate fiscal boosts are also being undertaken.”

Even with governments taking up the slack economic activity will be much lower.

Which brings us to the point where we are now. Governments announcing massive stimulus packages, pumping money into economies and increasing their deficits even further. The helicopter stuff.

“This then is the endgame for the global imbalances. On the one hand are the surplus countries. On the other are these huge fiscal deficits.

So deficits aimed at sustaining demand will be piled on top of the fiscal costs of rescuing banking systems bankrupted in the rush to finance excess spending by uncreditworthy households via securitised lending against overpriced houses.”

Got that? Read it again and take it in.

Goverments are throwing more money at the problem (to sustain demand for products in the economy) on top of saving the banks. And the Banks needed saving because they financed spending by people who did not have the money and were not credit worthy – that were secured against their properties, but they were over priced. Phew.

“This is not a durable solution to the challenge of sustaining global demand. Sooner or later – sooner in the case of the UK, later in the case of the US – willingness to absorb government paper and the liabilities of central banks will reach a limit. At that point crisis will come. “

Or in other words, at some point lenders of money to the UK and US governments will have doubts about their ability to repay their debts. Then there’ll be kak (Sorry).

One can avoid this. By the private sector in these countries lending again. But currently the private sector is in so much debt, so much strain, that this is unlikely.

The only other option is to rebalance. Smaller domestic deficits and an commensurate external surplus is the answer.

In normal times countries that produce more than they use, like China, can be useful. They suck in excess demand. But in times like these, times of deficient demand, its downright dangerous. They are effectively “importing” demand into their economies.

Countries like China need to create their own demand, because “importing” it is going to create political trouble big time.

“In short, if the world economy is to get through this crisis in reasonable shape, creditworthy surplus countries must expand domestic demand relative to potential output. How they achieve this outcome is up to them. But only in this way can the deficit countries realistically hope to avoid spending themselves into bankruptcy.”

“The world has run out of creditworthy, large-scale, willing private borrowers. The alternative of relying on vast US fiscal deficits and expansion of central bank credit is a temporary – albeit necessary – expedient. But it will not deliver a durable return to growth. Fundamental changes are needed.”

Don’t get it? Wolf goes on to illustrate the point he is making. The current huge US government stimulus (three times the size of South African economy at $760bn or 5.3 per cent of the US GDP) is not going to be enough to save many Americans from unemployment.

Assuming that the US private sector will now save more than they spend, and that America has a structural deficit of 4% of its GDP (it consumes 4% more than it produces every year) the government stimulus and deficit would have to be 10% per year indefinitely in order to keep Americans in their jobs at previous levels.

But Obama’s huge stimulus is only half of this level.

“Now think what will happen if, after two or more years of monstrous fiscal deficits, the US is still mired in unemployment and slow growth. People will ask why the country is exporting so much of its demand to sustain jobs abroad. They will want their demand back.”

In other words the US government will be getting deeper into debt so that the country can keep on spending more than it produces. And this spend will be going to excess production countries like China.

The US people will want their government to prohibit goods from China to be bought. They would want goods to be bought locally.

“The last time this sort of thing happened – in the 1930s – the outcome was a devastating round of beggar-my-neighbour devaluations, plus protectionism. Can we be confident we can avoid such dangers? On the contrary, the danger is extreme.”

Take note, Martin Wolf is not an alarmist kind of guy.

“Once the integration of the world economy starts to reverse and unemployment soars, the demons of our past – above all, nationalism – will return. Achievements of decades may collapse almost overnight.”

Poor Barack Obama…

“Yet we have a golden opportunity to turn away from such a course. We know better now. The US has, in Barack Obama, a president with vast political capital. His administration is determined to do whatever it can. But the US is not strong enough to rescue the world economy on its own. It needs helpers, particularly in the surplus countries. The US and a few other advanced countries can no longer absorb the world’s surpluses of savings and goods. This crisis is the proof. The world has changed and so must policy. It must do so now.”

Whether Obama fails or succeeds a big change is coming for South Africa. I will deal with that next time.

Related deployments:

1. A year of change – 2009
2. Martin Wolf and Robert Peston at Davos

obama the cowboy, originally uploaded by Mr. Wright.

I have followed Barack Obama’s speeches for some time now, and I’m busy reading his book. I have to say yesterday’s was a bit of an anti-climax for me. Parts of it seemed a little – corny.

Perhaps though it was not the speeches fault.

I am hungry for actual policy ideas.

And today he took action. Freezing the salaries of his staff that earn more than $100,000 and freezing the prosecutions of the prisoners of Guantanamo.

But reading through the speech afterwards a few things did stand out and gives a clear indication of changing priorities to come. But let me just say – Veels geluk meneer die President!

I do hope you don’t disappoint.

“…we are in the midst of crisis”

“Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”

Leapin’ for Obama, originally uploaded by Delta Niner.

“Our journey has never been one of shortcuts or settling for less. It has not been the path for the faint-hearted — for those who prefer leisure over work, or seek only the pleasures of riches and fame. Rather, it has been the risk-takers, the doers, the makers of things — some celebrated, but more often men and women obscure in their labor, who have carried us up the long, rugged path towards prosperity and freedom.”

obama, fuck yeah!, originally uploaded by Marc Johns.

“…our time of standing pat, of protecting narrow interests and putting off unpleasant decisions — that time has surely passed.”

“We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place, and wield technology’s wonders to raise healthcare’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age. All this we can do. And all this we will do.”

yes we can, originally uploaded by k.flight.

“Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control — and that a nation cannot prosper long when it favors only the prosperous.

The success of our economy has always depended not just on the size of our Gross Domestic Product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart — not out of charity, but because it is the surest route to our common good.”

message for obama, originally uploaded by happeningfish.

“To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history; but that we will extend a hand if you are willing to unclench your fist. To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds.”

Progress, originally uploaded by Breslow.

“And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to suffering outside our borders; nor can we consume the world’s resources without regard to effect. For the world has changed, and we must change with it.”

Obama digging new White House garden, originally uploaded by The Kitchen Gardener.

“Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends — hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism — these things are old. These things are true. They have been the quiet force of progress throughout our history.”

Related deployments:

1. Obama – Africa does not need strongmen
2. Joe the plumber shows why Obama is a superstar