A Midsummer Night’s Dream

Story Highlights:

• The annual Group of Eight (G8) summit—a forum consisting of leaders from the US, Germany, France, Britain, Italy, Canada, Japan and Russia—is currently being held in Japan.
• Each year, the G8 meets to discuss a typically ambitious agenda of global concerns.
• The bottom line: G8 talks tell investors little if anything about the future of global trade and the economy.

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The onset of midsummer has occasionally been an inspiration for those of a literary bend; perhaps the delayed intervals of twilight and warm nights provide a fitting background for the fantastical-inclined. And if Shakespeare isn't your thing, you can still laze on the beach with a good Stephen King thriller. Succumbing to a similar inspiration, the annual Group of Eight (G8) summit is showcasing its own share of illusions and delusions this summer.

A World of Troubles to Tackle
By Staff, The Economist
https://www.economist.com/international/2008/07/07/a-world-of-troubles-to-tackle

Each year, the G8—leaders from the US, Germany, France, Britain, Italy, Canada, Japan and Russia— meets to discuss a typically ambitious (and overzealous) agenda of global concerns. This year's agenda is no different: Topics range from African aid, to the "election" in Zimbabwe, to food and oil inflation to environmental protection. But what comes of all this talk—even talk between the heads of (mostly) the developed world's leaders?

The answer in short is not much. Don't get us wrong—communication and greater openness between world powers is fine and good, but as investors, we wouldn't place too much importance on the G8. The G8 has no administrative structure, nor does it have an enforcement arm. It's intended to be an informal forum and largely amounts to little more than talk. Talk means rhetoric, which means political grandstanding. Yup, G8 is ultimately a politics game. Past pledges of aid to Africa have fallen short of reaching targets. And global emissions talks have yet to see overwhelming approval. (And again, who's going to enforce any of this in the first place? Pardon us, but if we're looking for widespread, voluntary cooperation for mutual benefit, we'll go to the free markets, thank you very much.)

To boot, idealist G8 talk is often undermined by the actions of its own members. Individual member countries' domestic interests still trump any collective global objective. EU agricultural policies severely reduce African exports, even as Gordon Brown proposes a doubling of food production in Africa. Such contradiction highlights the struggle between ideals pitted against policies and why countries would do better to simply allow free trade and flow of capital between borders without government say-so.

World's Poor Hunger for Free Trade
By Kevin Hassett, Bloomberg
https://www.bloomberg.com/politics?pid=20601039&refer=columnist_hassett&sid=a9op3CW991ac

What all this means for investors is relatively simple: Ignore the G8. There are simply too many layers of rhetoric and too few (if any) clues about the direction of the global economy. If you want talk that goes somewhere, it would be better to stick with that Steven King thriller.