The U.S. wants to put a focus on reducing global imbalances and promoting the sort of structural reforms that would increase domestic demand in export-focused economies like China. Imbalances have narrowed since the onset of the financial crisis, with the U.S. current account deficit falling to $98 billion in the second quarter of 2009, but it remains to be seen if this narrowing will be sustainable once consumption begins to grow again. The Chinese fiscal stimulus and those of other export-oriented countries have supported domestic consumption, yet consumption in these countries is not yet a major growth driver, either for the countries themselves or for the world. In fact, Chinese consumption may continue to lag overall growth in 2009 and 2010. Many economists worry that the crisis and financial shocks might increase emerging market countries' propensity to self-insure through collecting reserves, which could exacerbate imbalances. Meanwhile, some economists continue to debate the role of global savings and investment ratios played in financial instabilities.
Even if global imbalances are a problem, it remains unclear whether the G-20 is the best forum through which to address them. It is perhaps too large and too diverse a group to tackle the issues of imbalances and sustainable demand in an effective manner. The U.S. and China agree that the U.S. needs to save more and China needs to consume more; but they differ on the timing of such a shift and how to bring it about. Boosting China's consumption would require reallocations of capital between the corporate and the household sector as well as patching holes in the social safety net to reduce the propensity to save for health, education and retirement.
OK, we didn't say he explained anything especially clearly. But these economic issues, mixed up as they are with politics, are big and complex and don't lend themselves easily to dramatizing. Roubini gives G20 the seriousness it deserves and, provided you're patient enough to digest his stiff prose, just might help you understand what's happening in Pittsburgh.