Global finance chiefs rang the alarm, but nobody really cares

Finance chiefs from the biggest economies rang the alarm over global growth and said they’re prepared to do something about it. Too bad they’ve never been less relevant.
Gone are the days when investors used to quake over ministers moving a comma or adding a period in key sentences. If their weekend statement was intended to shore up confidence or call out risks, they might as well not have bothered. Markets moved on Monday morning on Trump’s suspension of tariffs against Mexico, not words from the meeting of Group of 20
finance brass in Fukuoka, Japan.
That says it all. Not because markets are always right, but because the very things undermining confidence in world economy are precisely things the ministers aren’t equipped or empowered to handle. When big changes in economic policy are set by
presidential tweet in response to immigration issues, real or concocted, finance ministers can say what they want and it won’t amount to much. US President Donald Trump has made himself the secretary of everything.
The power to resolve world’s most immediate economic challenge, the trade war between the US and China, doesn’t rest with anyone within hundreds of miles of Fukuoka. It rests with Trump and Chinese President Xi Jinping. To be fair to the US delegation, China’s representatives were equally powerless.
If the finance ministers and central bankers said something in a communique, you could take it to the bank as the official view of the world and commitments made therein were more or less honoured. Part of that halo rested on the assumption that the assembled great people spoke for their respective administrations. Sure, circumstances could and did change.
The heyday of such meetings was in the second half of the 1980s and arguably through the 1990s with the Plaza Accord in 1985, the Louvre Accord two years later and additional efforts to nudge currencies and interest rates around based on shared interests. The numerals following the “G” changed, but the basic idea remained.
The Fukuoka irrelevance didn’t just happen overnight. Such gatherings have been losing gravity for a while. The markets that finance ministers and central bankers most directly influence, currencies and bonds, are so much bigger nowadays. The G-7 retired itself after the global financial crisis as premier powwow and Group of 20 became the main organ.
As monetary mandarins contemplate cleaning up after the tariff-induced slowdown, we ought to do two things: first, applaud central banks for their heroism; second, ponder whether they’re enabling bad behaviour by prospectively bailing out protectionism.
—Bloomberg