Despite the rash of finger-pointing, protectionism, and economic chutzpah that preceded the G-20 summit, which started today in Seoul, the world leaders gathered there look like they're close to reaching a financial agreement that may gloss over the differences that have increased tension in recent weeks. Going into the conference, Obama and Tim Geithner continued to push their message that China should allow its currency to rise more quickly so that it would consume more domestically and export less, easing trade deficits. But the bigger backlash seems to be against the U.S. Federal Reserve's $600 billion stimulus last week, which China, Germany, and Brazil say showed little regard for the dollar's role as the main reserve currency and could inflate commodities prices. Looks like they were right on the second count. Meanwhile, influxes of capital into emerging markets like Brazil could create bubbles and overvalued currencies or stock markets, which could drop dramatically as soon as investors look elsewhere. With the cooperative mood that immediately followed the financial crisis evaporating, it's hard to see how an agreement that papers over the nagging issue of trade imbalances will fix things. Why does this feel like the world economies are getting a divorce, but no one wants to tell the kids?
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