Today the G20 nations told the world that they're ready to take actions necessary to prevent Europe from taking down the world economy. The evidence so far would suggest that's not the case.
The Group of 20 nations released this communique: "We are committed to supporting growth, implementing credible fiscal consolidation plans, and ensuring strong sustainable growth. This will require a collective and bold action plan with everyone doing their part."
Those leading nations were trying to reassure the rest of the world that they will not let European debt bring down the global economy.
We talked to Mark Blyth, Professor of International Political Economy at Brown University. He told us that anytime you hear financial institutions or countries saying everything is fine, the opposite is true. He says the G20 assurance really means things are bad and it's time to head for the exits.
Greek default? Blyth says it's coming so the world better do what it takes to ensure that contagion - the crisis spreading beyond smaller EU countries to Spain and Italy - doesn't take down the rest of the European Union.
Blyth argues that the European debt crisis is a bank crisis, not a profligate Greece/Portugal et al problem. He says that when the Euro was created, vast amounts of money went from core EU banks (France, Germany) to peripheral nations (Greece, Portugal, Ireland) in part, through purchase of treasury debt. But that 10 years later, all that debt is toxic, leaving the banks with two choices: default or squeeze the peripheral countries to get them to pay it all back.
And he says that banks - and countries trying to protect their banks - are the ones who keep the crisis from being solved. Because, says Blyth, the way to get beyond the crisis is to let insolvent banks go under and force the rest to recapitalize now.
Then there are those (people in Austria and several other EU nations) who say that the EU should just kick Greece out of the club. Blyth says those voices are dangerous and irresponsible. He says that would lead to the collapse of the European bank system which would make the collapse of Lehmann Brothers "look like a tea party."
So to those who say "let it rip" Blyth says when Europe faces 40 percent unemployment: "what's your next trick?"
Also on the show today, the American Petroleum Institute says Americans consumed less gasoline in August than they have in any August in the last ten years. You'd think that August would be a good month for gasoline sales, with all the vacation driving and all. Still, overall petroleum use was up, which is good news. But the fact that consumers are pumping less gas is not, which means the Marketplace Daily Pulse stays even today.