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In Swipe at Trump, G-20 Acknowledges Climate Change

In Swipe at Trump, G-20 Acknowledges Climate Change

By    |   Monday, 24 February 2020 10:17 AM

The G-20 meeting of Finance Ministers and Central Bank Governors Meeting in Ryadh, Saudi Arabia has concluded.

In its final communiqué ,the G-20 expects economic growth to pick up modestly in 2020 and 2021 while downside risks to the outlook persist. The G-20 will enhance global risk monitoring, including of the risk of the recent outbreak of the Covid-19 Coronavirus.

Interestingly, representatives from China were notably absent at the event. Chinese authorities were instead focusing on containing an outbreak that has so far killed more than 2,400 people, infected nearly 80,000, disrupted global supply chains and has led to lower global growth forecasts.

How far the virus will spread and how deep its economic impact will be, remains unknown.

The main, and perhaps the only, achievement of the final communiqué was the use of the word “climate.” This was the first time the G-20 has acknowledged the existence of climate change in a communiqué since President Donald Trump took office.

Areas where international cooperation might actually achieve something, for example the digital tax or indeed the carbon tax were not a focus in the final communiqué.

U.S. Treasury Secretary Steven Mnuchin said on Sunday that central bankers will look at options for responding to the fast-spreading coronavirus as needed. Mnuchin said “I’m not going to comment on monetary policy, but obviously central bankers will look at various different options as this has an impact on the economy,” Reuters reported.

In Germany, we got the Ifo business climate survey, which shows that sentiment among German managers has improved somewhat. The Index rose from 96.0 points (Seasonally adjusted) in January to 96.1 points in February. So far, the German economy seems unaffected by developments surrounding the coronavirus. The survey results and other indicators suggest economic growth in Germany during the first quarter will amount to 0.2 percent.

Investors could do well keeping in mind that the coronavirus epidemic in China is a possible danger for the German economy that isn’t easy to gauge at the moment. Now, should it become a pandemic, then Germany as an export nation would be particularly affected.

According to the International Monetary Fund (IMF), Germany ranks fourth of the highest ranking countries in the world in nominal GDP with $4.00 trillion coming after the U.S. with $20.49 trillion, China with $13.4 trillion and Japan with $4.97 trillion.

It is also worth noting that German sentiment data is often less prone to overreaction than in many other places is the case.

In the meantime, media reports are suggesting that Chinese factories are increasing the pace at which they are returning to work that may ease supply chain concerns.

An earlier announced “lifting” of some restrictions in Wuhan, the city at the center of the Covid-19 coronavirus outbreak in China, has today been declared as “invalid” by the authorities in Wuhan. Wuhan’s government said it would continue to impose strict controls over its borders in order to prevent the virus from spreading further, the UK’s daily The Guardian reports.

We also got reports out of Northern Italy where some areas have been put into quarantine, which has made fears of the virus to rise and it is fear of the virus that is the most powerful economic force.

All this gives as today a picture of a full “risk off” sentiment in the financial markets with the known safe havens being accumulated further like gold, but also the U.S. dollar.

Finally, on Saturday, Warren Buffett published the yearly Berkshire Hathaway letter to the shareholders, which has interesting comments and advices for investors. 

In the letter we read among a lot of other things:

  • Anything can happen to stock prices tomorrow. Occasionally, there will be major drops in the market, perhaps of 50% magnitude or even greater.
  • “Charlie (Munger) [Buffett’s 96-year-old business partner] and I urge you to focus on operating earnings – which were little changed in 2019 – and to ignore both quarterly and annual gains or losses from investments, whether these are realized or unrealized.”
  • We constantly seek to buy new businesses that meet three criteria.
  • First, they must earn good returns on the net tangible capital required in their operation.
  • Second, they must be run by able and honest managers.
  • Finally, they must be available at a sensible price.
  • The opportunities to make major acquisitions possessing our required attributes are rare.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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The main, and perhaps the only, achievement of the final communiqué was the use of the word “climate.” This was the first time the G-20 has acknowledged the existence of climate change in a communiqué since President Donald Trump took office.
g20, trump, climate, change
Monday, 24 February 2020 10:17 AM
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