Baccardax: G20 Needs to Keep it Real

Comedians who can't sing always warm up their act with a bit of song. Financial journalists who can't write poetry (such as your correspondent) are quite fond of quoting famous bards in order to spice-up their copy.

So forgive a failed poet for adding a few lines of Robert Browning's "Andrea del Sarto - The Faultless Painter" to illustrate the principal concern investors should have ahead of this week's G20 Leaders' Summit in London.

"…Speak as they please, what does the mountain care?" asks Browning (in the voice of the aforementioned Florentine Renaissance master).

Indeed, why should we pay attention to four-and-a-half hours of debate followed by highly choreographed photo ops and a communiqué that most of us could have cobbled together on the back of a swanky hotel envelope (the kind in which most members of the G20 entourages are likely to find rest) with time enough for a quick dip into the mini bar?

The answer lies in Browning's reply (and one of his most famous lines): "Ah, but a man's reach should exceed his grasp, Or what's a heaven for?"

Let's hope the assembled collection of lawyers and academics (as most of the leaders were in their previous lives) aren't fans of Browning, because the last thing we need right now is overreach from a summit that comes just the global markets are beginning to find their voice again.

I'm not suggesting a complete "laissez faire" approach to capital markets, not when global governments have spent or pledged more than $15 trillion over the past 18 months to mop up the capital and capacity destroyed by the current recessionary fire ignited by Wall Street miscalculations.

But let's make sure we get the focus right and resist the temptation to come to a populist agreement simply for the sake of establishing a post-Summit consensus and quelling the angry crowds both vocal (on the streets of London) and silent (in homes and businesses around the world).

The initial signs aren't good. Already there's an accelerating momentum for a single global regulator and a crackdown on the "systemic risk" (sic) inherent in private equity and hedge funds. Turkeys don't vote for Thanksgiving, and no politician ever lost an election promising to crackdown on rich bankers (apart from a few local councilors in Darien and Mayfair). So we can probably anticipate the usual hectoring tone when the assembled leaders finish up their day's activities.

However, the larger danger, in my view, lies how politicians DO win elections: creating or protecting jobs. Euro zone unemployment ticked up to 8.5 percent in February and could breach 10 percent by the end of the year. The OECD says 25 million jobs will be lost in the global recession: labor organizations say the number is closer to 50 million.

And that's where the stresses in the G20 truly lie: China's making noises about changing the nature of the IMF and expanding its role in international finance not because they REALLY think they can usurp the dollar as the globe's currency (this ain't gonna happen) but because playing China'/s trump "we're just as important as you" card plays well domestically as the nation grapples with its 20 million jobless.

France and Germany, in the form of Angela Merkel and Nicolas Sarkozy, are banging the (very) populist drum of global regulation (with Sarko threatening to perform a de Gaulle-like "sortie" if things don't go his way) because the former is facing election in September and the latter is approaching George W. Bush-like approval ratings. And both have youth unemployment rates that far exceed the national averages.

Barack Obama is talking up stimulus because his nation's growth is dependent on other nations selling its stuff – and his own popularity is inextricably linked to stock market performance, which gobbles up government spending like an unfed house pet.

And Gordon Brown? One quick look at his air miles account seems to prove his aim is to try and manage this bizarre triangle of disparate interests in the hope of salvaging what little domestic confidence his electorate has in him by establishing his presence as an international statesmen astride the giant issue of the generation.

It's all a bit worrying. My concern isn't that the leaders will do too little, it's that they'll placate and (understandably) angry constituency with policy overreach that will choke global trade and blunt the tentative green shoots currently, but quietly, sprouting in the world's financial markets.

Reach, ladies and gentlemen, but please don't exceed your grasp.