G8 Communiqué Is 20 Pages of Drivel: Economist

Carl Weinberg and the team over at High Frequency Economics did not like what they heard in Toronto over the weekend.

"The Communiqué from Saturday’s G8 summit amounted to 20 pages of single-spaced drivel,” Weinberg said in a note to clients.

"Maybe we are missing something, but the words ‘we agreed’ appeared only once, and not in an active sense," he wrote.

With the exception of some talk on climate change in paragraph 21 and a renewed commitment to the Doha round the team saw nothing new in the communiqué.

"With the world economy still reeling from the biggest contraction in 80 years, with tens of millions of people unemployed, with prices falling and money and credit contracting, with abundant excess capacity, with a fragile banking system and with Greece and others facing fiscal crisis … well wouldn’t expect some exchange of views on how to deal with the mess?” Weinberg wrote.

The G20 compromise on deficit reduction and continued fiscal stimulus is non-binding and Weinberg said he does not expect Obama to race back to Washington and ask Congress to pass big spending cuts and tax rises.

"The G20 communiqué was stronger than the G8 communiqué and included extensive agreement on financial reforms that banking stocks will not like," he wrote.

The big problem is that there remains no mechanism to manage a default by Greece, he added.

"Greece’s fiscal woes, which we see as a much bigger threat the world economy than medium-term fiscal cutbacks and financial regulation, were not even mentioned and that is bad news for everyone," Weinberg wrote.