I don’t think anyone’s flagged this, but David Cameron appears not to know the difference between a trade surplus (or deficit) and a budget surplus (or deficit). Here he is at the G-20 meeting.
Discussing the economy, Cameron said: "What I want to achieve, above all, is to get the right outcome for the world economy, and that means those countries like our own with big budget deficits have to move faster. Other countries with surpluses can afford to do different things."
Which countries with budget surpluses? Can anyone think of one? Of course, what the Americans (and many others) were talking about were the global imbalances - the split between those countries, like Germany and China, with large trade surpluses and those, like the USA, with large trade deficits.
By definition, everybody can’t have a trade surplus, so if the deficit countries have to reduce their trade deficits without corresponding action on the part of the surplus countries, the adjustment is a net reduction in aggregate demand and a further fall in world GDP. Deficit states have to reduce their standards of living, exporters get to throw people out of work. (I wrote a more worked version of this elsewhere.)
What Obama was after was moves by the surplus states to reduce their trade surpluses, and enjoy their money - whether by adjusting the renminbi-dollar exchange rate, by letting wages rise internally, or by investing in the deficit countries in the European Union.
Not only did the summit not attain this - in fact, it succeeded in producing a communiqué that suggested simultaneous reflation and deflation - but the prime minister didn’t even realise what they were talking about, and nobody seems to have briefed him back on track. This should be shocking.