In June of 1933, a group of 66 world leaders gathered in London to try and come together on an agreement that would bring the world out of a depression.  The result of that failed meeting called the London Economic Conference was nearly 12 more years of negative growth spurred on by protectionism and beggar-thy-neighbor policies.  For those of you not familiar with the term, beggar-thy-neighbor is defined as a “trade policy of competitive devaluations and increased protective barriers that one country implements in order to gain at the expense of their trading partners”.  The London Conference was a failure because of Gold, Currency Manipulation and the ever important protectionistic policies.

Flash forward almost 76 years.  On the eve of what is called the G20, the summit of leaders of the 20 largest industrialized nations, also in London, the eerie similarities between the economic situation and the means by which some who make up the group are proposing to resolve it are ever-present.   For 75 years, the common thought was that President Hoover governed as the US fell into a recession and depression while President Roosevelt’s “New Deal” brought the world out of it.  And while it is widely believed that the Great Depression began with the stock market crash of 1929, hindsight shows that truly it began picking up steam in 1933, after the London Economic Conference.

What took the world out of a depression was not the liberal spending and social programs set up by Roosevelt, it was, in fact, the Second World War.  And while many will argue the causes of the depression, it can be widely attributed to the massive foreign debt incurred by governments during the First World War.  This was a primary topic at the London Conference years ago, settling intergovernmental debts.  It was believed by the European Block that the massive debts were the problem while the Americans were arguing that it was the Europeans who were too careless in their spending and management of assets and in their insistence on “keeping great armaments” that was sinking the economy.

My, how times have changed.  These days, as the world is sinking into an economic black-hole, we have the United States arguing for spending while the Europeans (sans Britain) are murmuring, quite loudly I might add, that the US is spending too much – on corporate bailouts, social programs and of course, “armaments” (aka Military Spending).  What the world cannot afford to see is a failed conference, and as much as it pains me think – I do believe this one will be a failure.

French President Nicholas Sarkozy declared earlier today that he will walk out of the conference if French demands for tougher financial regulation are not adopted.  I was thinking that the conference would fail but there would be some sort of diplomatic “statement of understanding” that would be passed around the media to give the illusion that all went well – while in reality nothing was accomplished.  However, the French president said that he will not accept a “false success with language that sounds good but contains no commitments.”   Shows you how much I know.

Anyway, it is important to be aware this week of what is going on – as what happens in London when groups of leaders meet tends to have a massive impact on finance and trading.  It is important to not just listen to the words being spoken, but try and hear the words that are not being spoken.  The past two weeks has delivered us many examples of world leaders not holding back their tongues, Germany’s Merkel, Russia’s Putin, France’s Sarkozy and The EU’s Topolanek to name a few.  But can the mighty 20 come to an agreement or will we witness a repeat of 1933?  Stay tuned…….. 

Have you ever heard Venezuelan President Hugo Chavez speaking to his people when it came to his governments “necessary” acquisition of some private industry?  If you have ever heard him you would hear his scripted banter about how the greed of the specific business he is commandeering has hurt the national pride as international competitors have done better.  You will hear him speak about how the wrongs of the past can be righted and how the decisions made by those running the company have hurt the company and the country as a whole.  You will hear him say how he is not interested in governing the business, only overseeing its restructuring so that it serves the national interest.  This is all a bit communistic of course, as the socialist government of Hugo Chavez’s Venezuela holds many ideals that Marxists are identified by.  

I bring up Hugo because today I heard something similar coming out of another Western Hemisphere leader – who said things like “Year after year, decade after decade, we have seen problems papered-over and tough choices kicked down the road, even as foreign competitors outpaced us” as well as “while these are very different companies with very different paths forward, both need a fresh start to implement the restructuring plans they develop” – and of this point I am driving at will not be complete unless I include this one “But just in case there are still nagging doubts about what we are doing today, let me say it as plainly as I can….. if you buy a car from Chrysler or General Motors… your warrantee will be safe…. starting today, the United States government will stand behind your warrantee.” — I guess you guessed from that last one who spoke these words but it is important to note that – and I go back to President Obama’s words Monday one last time to complete this “Let me be clear: the United States government has no interest or intention of running GM.”

Now, aside from these words spooking the stock markets, it is important to point out that while the US has no interest in running the Automakers, at Obama’s request the CEO of General Motors resigned Sunday night. As well, a “Car Czar” or more officially titled, “Director of Recovery for Auto Community and Workers” has been appointed to head up the “restructuring” effort.  Now why can’t the y just say they nationalized the Auto Industry?  Heck, they nationalized the banks and AIG even though they said that they gave them “collateralized loans” which would imply that the companied can still operate autonomously.  We saw with the AIG bonus spectacle how autonomous these zombies really are.

This is important here to understand what is truly going on.  As Obama takes 500 escorts, a few helicopters and a super-fortified limousine called “the beast” to London today for the G20 meeting (at a cost of hundreds of millions of dollars I might add) – he is desperately trying to show his world leader peers that he has a grip on what is wrong.  He is trying to deflect international criticism of his spending ways as he tries to garner support for a massive global stimulus bill.  So when it came time to make a decision on giving the automakers more money - he waffled, came up with this crazy idea that did not deny them money (if he did he would hear it from the Auto Unions who helped elect him) but gave them more time to reorganize themselves – but did so in a way that the government is leading the effort in this restructuring.  He required that a non-governmental employee, a CEO, resign, he appointed a Director (who works for the Department of Labor as a deputy secretary) to head up the effort, he is guaranteeing the warrantees on the cars, and in the end, after the G20 is over – he will give them  21 Billion Dollars more.

This is a sham that will affect the Dollar value overall as it continued to get diluted as the US printing presses keep rolling.  This is a sham that is being guised as a help but in reality is the beginning of the end of a totally free market system in America. 

British Prime Minister Gordon Brown took a tongue lashing from an EU parliamentarian who just happens to hail from England today. If this does not spell the end of the world (see my last posting), I am not sure what does. Daniel Hanaan, an EU legislator from South-Eastern England tore into the Prime Minister – aka Brownie - claiming that he has bankrupted the British Government with his spending and has corrupted the financial system for generations to come.

Did I ever tell you that some the best TV is on the BBC or Sky News (in the US you can catch it on C-Span on Sunday nights) in the form of the Prime Ministers Questions. This is a weekly event in which the British Prime Minister is, as the title describes, questioned by parliament members about his actions and policies.

The Brits are so polite – “the good sir, right honorable gentleman is an incompetent who has done nothing but discredited his family’s name – a name that I if I might be allowed to add, took many years of hard effort to establish on the part of his ancestors so undeserving of this legacy” – or my favorite – “With respect to our honored Prime Minister, a well educated, charitable and compassionate man, you are morally bankrupt in believing that your policies are for the greater good of England”.

They are so polite when they insult – and their accents make it so much more convincing. But there were no niceties here. Mr. Hanaan had the British disposition, dry and witty, but there was nothing nice about what he was saying.

The best line of the rant was “The truth is Prime Minister, You have run out of OUR money…The country as a whole is in negative equity…every British child is born owing about 20,000 pounds…servicing the interest on that debt is going to cost more than educating that child”.

If I could clap on paper I would – that was better than John Stewart tearing Jim Cramer a new hole two weeks ago because it was genuine. It happened in the EU parliament – in front of the world – and at a time when Brown is trying to gather support for a Global New Deal with his in advance of the G20 meetings next week.

At the exact same meeting, not 45minutes later, the EU President (who is actually the Czech President in their rotating system ) Mirek Topolanek, said that President Barack Obama’s economic recovery efforts were – and this is a direct quote – “A way to Hell” – now this man lives in what many could consider to be a colder version of hell so he knows, only last week his legislature voted “no-confidence” against him in his own handling of the crisis – but still this was big news.

Mr. Topolanek also attacked America’s growing budget deficit and the Buy America campaign. He said President Obama’s decision to spend his way out of the mess was the ‘road to hell’. And while many EU members were playing down his words, none were disagreeing with them. At most, he was criticized for his lack of tact but not for the substance of his views.

Not five hours later at 9:30 AM EST, The US Treasury Secretary, Timothy Geithner was speaking in front of the Council on Foreign Relations when he was asked a question about China’s call for a Global Currency. Geithner surprised the room and everyone watching on TV by saying he has not read the plan written by Chinese Finance Minister Zhou Xiaochuan, but that he respected and admired Mr. Xiaochuan and that Washington was “open” to the idea. He needed help from a moderator (who realized the impact Geithner’s words had on the Forex Market) towards the end of the program who asked specifically about his stance on the Dollar as a reserve currency to which Geithner said “it will be around for a long time” - very reassuring.

The impact these three events have on our future has not yet been determined – we need to wait for the G20 next week – but in the short term, the Pound and Dollar took a beating. If this is a sign of things to come I am not sure if I should laugh or cry.