Macroscope | A spectre of collapse or a vision of hope in the New Year

There was a “ghost at the feast “when G20 leaders met in Buenos Aires for their recent summit. While the key leaders postured and played politics, IMF managing director Christine Lagarde, delivered a sobering message that all is far from well with the global economy, but no one seemed to be listening.

This soon came back to haunt the leaders as the Dow Jones index plunged on Tuesday and stocks in general went into an ominous slide that is almost certainly far from over yet. G20 leaders may wish to give the impression that all is well on the economic front but markets are simply not buying it.

If the summit had taken place against a backdrop of buoyant world trade, robust fiscal and monetary conditions, booming investment, strong consumer confidence, modest debt and stable credit conditions, a US-China trade “spat” might not have mattered too much. But the situation is opposite in all respects now.

Worse, as many of the G20 heads showed by their antics in Buenos Aires there is a building crisis of leadership – a “top down” sense of drift that is feeding through from the highest political levels to the grass roots of the global economy and into consumer and business sentiment.

No one really expected the heads of the world’s biggest advanced and emerging economies to behave in Buenos Aires as though it was April 2009 in London again, when the G20 put on a convincing show of political leadership at the height (or depth) of the global financial crisis.

There was no Lehman Brothers collapse (or of Bear Stearns, AIG and other financial institutions) echoing in their ears as they met this time. But there were plenty of ominous portents that all is far from well with the global economy, as Lagarde went out of her way to emphasise.