LONDON, England – The G-8 summit is meeting once again, and it’s once again a reminder of how absurd the gathering is in the new world order.

We in the media slavishly follow and report on it, despite the fact that usually little if anything of substance is accomplished. It’s time to have a rethink of its relevance or how it could make itself relevant.

For starters, let’s acknowledge that the G-8 accounts for almost half the world’s economic output, but it is developing countries and emerging economies that account for 70 percent of the economic growth. China isn’t a a member of the G-8, but given its importance in the world economy it certainly should be, so should India and Brazil.

The G-8 will discuss climate change, and China is the world’s biggest emitter of carbon. It’s been invited to an outreach group at the summit to discuss climate change, but it should be at the center of the table.

High oil prices will also be high on the agenda. The United States, Canada, Russia, and Britain (all members of the G-8 produce 29 percent of the world’s oil. But the G-8 plus China consume two thirds of the world’s oil output.

Of course, the G-8 will express its concern, and possibly blame speculators for part of the reason for high prices. They’ll also undoubtedly ask OPEC to pump more oil. How convienent to look outside their own borders for solutions. Instead, they should be strongly urging conservation in their own countries and giving business massive incentives to come up with cleaner fuel supplies and cars.

Also, if you were going to have a serious discussion about oil prices, wouldn’t it make sense to have Saudi Arabia, the world’s biggest oil producer at the center of the table.

They’ll also acknowledge the need to do something about high food prices. But here are the facts thanks to economist Carl Weinberg of High Frequency Economics. The G-8 countries produce 41 percent of the world’s wheat, 58 percent if you add in China,and consume the most of it.

The G-8 produces 48 percent of the world’s corn, or 68 percent if China is included. As Weinberg points out, “You would think that the assembled majority of world suppliers and buyers of foodstuffs could cook up an answer to falling global grain inventories, which are already at the lowest levels seen in the 60 years that the USDA has produced estimates.

“You might think that the right places to start addressing global food shortages would be in the United States and Euroland - the world’s biggest producers of corn and wheat respectively - where farmers are offered subsidies not to plant crops. However, the U.S. and Euroland hold on to their agricultural support programs tenaciously. The Heads are unlikely even to consider tinkering with these entrenched systems,” Weinberg concludes. I couldn’t agree more.

So the G-8 will address the major issues affecting the global economy, but if it wanted to really be relevant it would take bold measures instead of making vacuous statements. But that would take political courage, something in short supply.

It would also expand membership in the club. The outcome might not be any different, but it would at least be more reflective of the new world order, and that alone might give the summit gathering more relevance.

Tell me what you think, should the G-8 be expanded, does it have any relevance, or do you agree with me that these summits are pretty much a waste of time, and that if they are going to become more relevant, they need to reflect the new world economic order?

Anyone who has listened to me doing commentary on CNN or read these blogs knows I am bearish, and have been for a long time. It’s been the right call, and I have no reason to feel any optimism now.

Stock markets which rallied sharply following the rescue of Bear Stearns in March, have stumbled badly again.

The belief that the worst of the credit crunch was over has been proven wrong. Banks continue to reel from their ill judged decisions, with predictions that the write downs from the sub-prime crisis could total $1.2 trillion, or about three times the current amount.

Oil prices as I write are now over $140 a barrel, and could rise as high as $170 a barrel in the coming months, according to Chakib Khelil, president of OPEC.

Add in high food prices and inflation has become a primary worry for investors.

The rise of inflation is a global phenomenon. Close to thrre billion consumers are now living with double digit rates of inflation, according to economist Joachim Fels of Morgan Stanley.

Fifty countries now have inflation running at more than 10 percent, accounting for 42 percent of the world’s population and including six of the world’s most populous countries.

How far central banks will go in terms of fighting inflation is unclear, but it’s a big worry for investors.

Rising inflation comes at time when worries over growth now have some talking about the possibility of stagflation in major countries like the United States. Hopes of a second half rebound in the U.S. have now faded.

It’s the worst of possible worlds for investors, and anyone who thinks the worst is over, better think again.

Tell me what you think.

LONDON, England – Never have so many come for so little. For many, the outcome of the Saudi oil gathering at Jeddah is a huge disappointment.The Saudis announced they would raise daily production by 200,000 barrels a day to 9.7 million barrels.

But let’s put this in perspective. It’s doesn’t even make up for the 300,000 barrels of lost production suffered by Royal Dutch Shell and Chevron in the past week due to militant attacks in Nigeria.

The Jeddah gathering had a huge build-up and came at a time when governments and consumers are feeling the double burden of record high oil prices and food prices. Some had hoped that Saudis would increase production by as much as 500,000 barrels a day.
The Saudis said they would expand production capacity, but that’s in the future, not now.

The world is crying out for more oil. World oil demand is expected to rise by 800,000 barrels a day, according to the International Energy Agency.

So where does this leave all of us? With high oil prices continuing. As I’ve written prveviously, don’t blame the speculators. What’s going on in the oil market right now isn’t a short-term problem but a structural shift, based on increased demand, and not enough production.

At close to $140 a barrel oil is trading at five times the average six years ago.

And there are predictions that it could even higher, possibly to $200 a barrels in less than two years.
Given the outcome of the Jeddah gathering, there’s no reason to think those assumptions aren’t corrrect.

The Saudis along with others attending the summit had to look like they are concerned. They touched on several issues surrounding the oil market, but with the exception of the Saudi production announcement, there’s no real outcome.

Given how little the summit produced, it probably would have been better for everyone to stay home, at least that would have saved some jet fuel.

Tell me what you think.

LONDON, England – Anytime you read an article or get an explanation about why oil prices are rising, soaring demand from China is always on the list.Now the Chinese government is taking some of the subsidy consumers enjoy by raising retail prices on gasoline and diesel by at least 17 percent. It’s the first rise in Chinese fuel prices in eight months. Oil prices fell nearly $5 a barrel on the news to just under $132 a barrel.

The market’s reaction underscores the idea that it isn’t speculators driving the price higher, but issues about fundamental demand. And the market thinks that the higher prices the Chinese will have to pay at the pump will lead to less demand.

But not everyone is buying the argument. Why? First of all, even though its a big hike, it may not be enough to discourage people from driving. Secondly, refiners who have to pay world prices for oil have been operating at losses because they haven’t been able to pass on the true cost. Refiners have cut production. Now, that prices are higher production could actually rise, helping to meet demand where they have been shortages and rationing.

Even with the price announcement, what the Chinese pay for their petrol is still way below market prices. One estimate said that China would have to raise fuel prices by 60 percent to come into line with international levels.

Of course, China isn’t the only country to subsidise fuel. Other nations, in Asia, the Middle East and parts of Latin America all help foot the fuel bill. These countries make up half the world’s population and their increased oil needs is what is pushing up prices. In places like the United States, Japan, and Europe, demand is is either flat or contracting.

If all those developing countries did away with subsidies, then that would probably would lead to less demand. But polticians know that would also likely lead to widespread social unrest, which has happened in some parts of the world. It would also mean less growth and higher inflation.

So even though the Chinese have raised prices, they are still way below market prices — and until that changes, and changes elsewhere, expect oil prices to remain high.

Tell me what you think — should the Chinese have raised prices more? Should governments do away with subsidies altogether? Looking foward to hearing your thoughts.

LONDON, England – If you think the price of oil can’t go any higher, you could be disappointed. On Monday, oil shot up towards a $140 a barrel, a record, before settling the day at $134 a barrel.

Even word that Saudi Arabia would increase production wasn’t enough to keep oil from ratcheting higher. And even though it ended well off its high of the day, we’re still above $130 a barrel, with predictions it could hit $150 by year end, and eventually move to $200 a barrel.

Saudi Arabia has called a meeting for June 22 to help stabilize prices. But will that really make any difference. Barring some dramatic announcement, I’m skeptical. I’m in the camp that believes what’s going on in the oil market isn’t just the result of a weak dollar, or speculation. It’s based on the belief that there is a structural shift going on, based on a need for increased oil as developing nations continue to grow their own economies, and not enough supply.

You can point the finger at speculators, as many do, but they aren’t the problem. They just follow trends, they don’t create them.

Even a CNN quickvote shows the public is skeptical that a production increase by the Saudis will ease prices. 43 percent said yes, 57 percent said No.

Oil producers have lost control over pricing. And while high prices are great for producers’ revenues, they always worry that if the price gets too high, it could lead to a sharp slowdown in the global economy, hurting demand, and causing a sharp fall in the price of oil.

I don’t think that’s a worry for the oil producers right now. The bigger worry is their inability to keep prices from rising, and the political pressures that brings. That’s what’s triggering the upcoming meeting, the Saudis have to appear like they are doing something.

The problem is, the market has moved beyond their ability to control it.

Tell me what you think.

LONDON, England – Those fretting about a substantial downturn in the U.S. economy, need not worry. At least that’s the way Ben Bernanke sees it.

Bernanke thinks the risk of a “substantial downturn” has receded in the past month. The Fed chairman thinks that past rate cuts, Federal tax rebates, and record exports will be enough to keep the economy from any a sharp nosedive.

He’s not alone in his view. More than half of 48 private economists surveyed do not believe the U.S. economy is in or will enter a recession this year, that compares to 40 percent a month ago.

“The consensus now suggests the downturn in economic growth will be less steep than earlier feared, but the subsequent recovery to growth to its trend rate will take longer than hoped a few months ago,” according to Blue Chip Economic Indicators.

Here’s the breakdown. Third quarter growth at 1.5 percent, and fourth quarter at 1.2 percent. That’s weaker growth than previously forecast, but still not a recession in their books.

But for 2009, the group of economists think U.S. growth will be 1.9 percent, that’s the sixth month in a row that expectations have been ratcheted down.

As for inflation, they think it will average just 2.6 percent next year, compared to nearly 4 percent this year.

The group of economists also think the fed is done cutting interest rates which now stand at 2 percent, compared to 5.25 percent last September.

As to when the Fed raises interest rates, they think that won’t happen until second quarter of next year.

These guys get paid for a living to make predictions about the economy and interest rates.

Even if they and Mr. Bernanke end up being right, and the U.S. avoids a substantial downturn, it won’t feel like that to many Americans who are facing a fall in real wages, falling house prices, higher food bills, and record gasoline prices.

To them it feels like a recession, and in my book, that’s all that matters.

Tell me what you think.

LONDON, England – Let’s get away my steady diet of doom and gloom and talk about something else. Bribing kids, in this particular case, kids who are obese. Forget educating your kid about nutrition. Cold hard cash works best.

Should obese children be offered cash rewards to lose weight?

Yes

No

or see results

Scientists in Switzerland gathered data on more than 100 families. The families had at least one obese adult and one obese child. They had to follow one of four programs including motivational letters and different diets.

The final option was cold hard cash, bribing the kid — five euros for every kilogram they lost, and five euros each time they improved their body mass index score.

In the words of Professor Claus Luley: “We found that giving the money works in children. They were certainly eager to get their hands on the money.”

Now this little experiment got me thinking about the ethic of bribing kids to get them to do something.

Is it right for children to expect some sort of monetary or other material reward for doing something well? Or should a parent try and instill a sense doing something for its own sake, and that in itself is a reward?

In the financial world, bankers, traders, and others get performance related bonuses. So do sports stars, and people in sales.

So why shouldn’t a kid get a type of performance related bonus? What’s wrong with giving your kids money if they get good grades, or lose weight, keep their room clean, or whatever you deem is important?

Do such incentives for children teach them the wrong values, or is it really just a reflection of the way much of the world operates? In certain instances, I don’t have a problem with it.

I look forward to hearing from you, tell me whether you agree or disagree.

LONDON, England – On May 7 I wrote a blog about the possibility of oil hitting $200 a barrel. Since then, oil has continued to move higher. And now the futures market is pricing oil at close to $140 as far away as December 2016. Even by this year’s end there are predictions that oil, trading at $129 dollars a barrel now, will reach $150 a barrel.

Motorists are feeling the pain of higher oil prices at the pump.

That’s the forecast of T. Boone Pickens. He’s a man you may not have of heard of before, but he’s well known in the oil world and well known among many on Wall Street. When he speaks, people listen. He speaks in language easily understood. His reasoning for oil hitting $150 a barrel by year end is simple.  “Eighty five million barrels of oil a day is all the world can produce and the demand is for 87 million,” he said in an interview.

His prediction of course, follows Goldman Sachs which sees oil prices averaging $141 in the second half of the year. Goldman Sachs really turned heads when it predicted earlier this month that oil would reach $200 a barrel within 6 months to two years. Oil a year ago was trading at less than half its current price.

Is there a speculative element in oil’s rise? Of course. Might there even be an element of panic? When oil on the futures market jumps 9 bucks in one day, panic may be a factor. But there are also plenty of fundamental reasons people are predicting higher oil prices ahead, even out to 2016. I can’t predict where oil prices will be eight years from now. But I do know they aren’t going to fall dramatically anytime soon, if ever again, short of world wide depression.

None of us, with the exception of producers, like high oil prices. But few of us are willing to drive less or fly less, or radically shift our home heating and cooling needs. It’s much easier blaming the Chinese and the speculators.

Too bad, it’s blame misplaced. Can we really blame the Chinese for wanting to continue to build their economy, after we in the West have been using oil for much, much, longer to build our economies?

As for the world’s largest oil consumer, the United States, Americans are complaining about the price of gasoline, but they’re hugely dependent on their cars and many of them hugely lazy and overweight. Their definition of taking a dog for a walk is driving with one hand on the steering wheel and the other hand on the leash.

Who do you blame? Do you think oil prices will remain high for several years to come? Let me know your thoughts.

LONDON, England – I want to ask a controversial question. What do you fear more, terrorism or a recession? Now before you think I’m insensitive or have gone off the deep end, let me explain how I came to ask this.

Which do you fear more: Terrorism or recession?

Terrorism

Recession

or see results

I was leaving the CNN building and outside, one of our camera crews had set up to do a live report. I asked the producer what the reporter would be talking about. “Terrorism,” she replied.

So I asked her, what do you fear more, terrorism or a recession? She gave me one of those looks which said, you can’t be serious Todd, suggesting that the one and only correct answer is terrorism.

But it’s not the only answer, and here’s why.

The cameraman said he actually feared a recession more. “What do you mean?” the producer asked, incredulously.

The cameraman said he figured his chance of being a victim of terrorism was pretty low, so he feared a recession more. And this is a guy who has seen death up close.

In no way am I downplaying a terrorist attack. Obviously when it happens, it has a devastating effect. We have seen the aftermath of 9/11, the Madrid bombings, the London bombings, and elsewhere.

The image of those planes flying into the World Trade Center in New York City, smoke billowing as people ran from the towering infernos, will forever be etched in our minds.

I can also remember feeling uneasy the first few days after the bombings in London in July of 2005, but then life regained its normalcy, its everyday rhythm.

Even in the immediate aftermath, I was struck by how many people went on with their daily lives, taking public transportation or standing and drinking outside pubs, refusing to give in to the fear that terrorists want to instill.

However, right now, I suspect if I asked many people what do you fear more, an act of terrorism or recession? Many would answer a recession.

I think for many of us, an act of terror is something we can’t control, because we don’t know when or where it will happen.

When it happens our hearts go out to the victims, and families, and we also feel angry and violated because innocent people die or are seriously injured and traumatized.

But as horrible as terrorism is, it could be argued that a recession affects many, many more people, millions who don’t lose their lives, but lose their jobs, their identities, homes, and possibly relationships also with devastating effect.

So is it any small wonder that the cameraman and others might fear a recession more than a terrorism attack?

As I said in the first sentence, it’s a controversial question, but in these times when there’s so much talk of recession, it’s a question I’m asking.

Tell me what you fear more, I’d like to know where you stand on the issue.