ANALYSIS: Why the G20 bunfight in Toronto will solve nothing

With both business and consumers looking for a lead, the Toronto summit promises to be slapstick farce.

With the Toronto summit looming, data is piling up to suggest that – without concerted action – Crash 2 is now near-inevitable.

Japan’s Nikkei average fell 2 percent overnight as further concerns about eurobanks damaged investor confidence, and the euro took another hammering on the currency markets. Here at home, the Bank of England warned that the UK’s economic recovery is at risk if the nation’s banks do not move swiftly to raise the £750bn-£800bn needed to refinance their borrowings due by the end of 2012. Quite how they might do this with interest rates under 1% was not part of the Bank’s press pack.

To make things worse for those over-borrowed banks, Gillian Tett in this morning’s FT rightly notes that companies are hoarding cash and thus reducing dependence on loans. The Slog reported the same trend in the USA last week – but such behaviour also suggests a corporate sector expecting a bloody time for sales, and thus hoarding liquidity. Very sensible move.

In the US, the administration is under attack from Republicans and some centrist Democrats for spending too much. Polls have shown rising public concern about deficits, but President Obama continues to insist (with four States now near-bankrupt) that spend-spend-spend – and stimulus to encourage spend-spend-spend – is the only solution. This column continues to worry about the President’s loose grasp of fiscal economics.

As indeed do the rest of the G20. Overall, in fact, where concert is required, there is only a cacophony of disagreement….between the US and the EU, internally within the EU, and between Britain and everyone else.

Prime Minister David Cameron voiced our concerns (and they are widely held here) by observing ahead of time that the intentions of such global forums “rarely seem to come to fruition in real, tangible global action.” He added that he hopes to pursue “immediate and relatively simple steps” that can be achieved through bilateral deals with countries, such as on trade. Or put another way, why the f**k are we all going on this jolly? It’s a reasonable question – to which I have yet to hear a credible answer.

There is frustration among other G20 members, particularly Germany, about mixed signals from the US, and an American consumer culture that seems unable to grasp a world after debt – other than one in which there is even more debt . The Merkel Government in particular is leaking that, while they have received forthright criticism in private from US officials such as Tim Geithner, these contrast with more emollient statements made in public. This confirms the Slog information of some weeks back of Obama’s irate phone calls to EU members – and also again makes one anxious about the man’s fiscal compass: his first messages were ‘get your deficits down’, but now it’s ‘get your consoomers spending’. OK Barack, we’ll do both then.

As we’ve said already, nothing will come out of Toronto. The world’s individual countries are turning inwards, towards the protection of their own electorates. Gordon Brown’s plea for ‘no siege economies’ was always a feeble tilt at 2000 windmills, and Cameron’s view of this forthcoming junket sums up the naivety of The Man Who Saved the World.