As playwright Arthur Miller once observed, “an era can be said to end when its basic illusions are exhausted.” That’s exactly what Newsweek columnist Ruchir Sharma (who happens to have the rather impressive day job of running emerging markets for Morgan Stanley Investment Management when he’s not cranking out copy for us) recently observed to me. Sharma’s take is that all of the basic illusions that defined the late global economic boom – easy money, endlessly rising houses prices, etc – have been exhausted. All but one, that is – the notion that oil prices are going to skyrocket soon, and stay high permanently, thanks to shrinking supply and the rise of the big emerging markets, like China.

I’ve blogged and written myself many times about the case for high oil. But Sharma points out something pretty spectacular and wholly overlooked. While there are going to be peaks and valleys, if you look at the price of oil over a 200-year period, it actually hasn’t gone up AT ALL. Inflation adjusted, the price of oil today is the same as it was in 1976, and before that, in the 1870s, which is when it was first used industrially in the U.S. What’s even more amazing is that the same goes for nearly every commodity you can think of (for more on this, look out for Sharma’s upcoming feature on the topic in Newsweek, where he will explain all!).

None of this is to say we won’t see price spikes in the short term – the energy industry is notoriously volatile. But the fact is that in the long run (bear with me here, and forget Keynes!) automation, technological innovation, and the replacement of one commodity with another (coal with oil, oil with gas, etc) will inevitably drive down prices. Who says we only bring you bad news here on the WON blog?

Former AIG CEO Maurice "Hank" Greenberg is clearly still in the first of the Five Stages of Grief. As he told the Wall Street Journal: 

"I don't feel any responsibility at all."

That's a bold statement for a man who spent 38 years building AIG into an international powerhouse, started the financial-products unit responsible for its implosion and left the firm only in 2005 -- at which point "the unit had already sold about half of the swaps that caused the biggest problems."

Despite all the promises today at the G20 to ban tax havens, stop protectionism, and hold those greedy bankers accountable, the truth is that world leaders missed the boat. The only issue that matters – and the only one on which they made absolutely NO progress – is rebalancing the global economy. Until Americans stop spending so much, and China and Germany and all the rest of the surplus countries start spending more, we’re all in a sinking ship.

Who cares how many millions people are stashing in offshore bank accounts in Hong Kong and Macao? Whatever the figure, it’s a drop in the bucket compared to the $2 trillion in reserve cash that’s sitting underground somewhere in China. I suspect that French President Nicolas Sarkozy is only banging on about tax havens because it’s a way to signal his annoyance with the Chinese, without really having to do the hard work of fixing chronic imbalances in the global economy that led us all into this mess to begin with. Tax havens are just a symptom of the problem – the real issue is the bulimic global economy.

What’s ironic is that while the Chinese, with their vast pools of savings, seem to have the upper hand now, they may ultimately suffer more if they can’t rebalance their own economy, and cut their reliance on exports. Historically, it’s always been the surplus countries, rather than the deficit countries, that suffer most in recessions/depressions.

For more on that, check out these two very smart pieces from Newsweek’s own Stefan Theil, and Peking University professor of finance Michael Pettis.

You've probably heard by now that the G20 reached a consensus, and we bet you're probably sneaking clandestine glances at the news when your boss isn't watching. We applaud that. Because we don't want you to get caught, we've pulled out the two juiciest clauses from the plan for a quick read. Big questions for now: What about stimulus coordination? And where in the world is all of this money coming from? FT has its suspicions that the world's currency printing presses will be getting quite a workout soon. More to follow...

Strengthening the IMF: Point #5
The agreements we have reached today, to treble resources available to the IMF to $750 billion, to support a new SDR [IMF special drawing rights] allocation of $250 billion, to support at least $100 billion of additional lending by the MDBs [Multilateral Development Banks], to ensure $250 billion of support for trade finance, and to use the additional resources from agreed IMF gold sales for concessional finance for the poorest countries, constitute an additional $1.1 trillion programme of support to restore credit, growth and jobs in the world economy. Together with the measures we have each taken nationally, this constitutes a global plan for recovery on an unprecedented scale.

Building Global Regulators: Point #15
To this end we are implementing the Action Plan agreed at our last meeting, as set out in the attached progress report. We have today also issued a Declaration, Strengthening the Financial System. In particular we agree:
· to establish a new Financial Stability Board (FSB) with a strengthened mandate, as a successor to the Financial Stability Forum (FSF), including all G20 countries, FSF members, Spain, and the European Commission;
· that the FSB should collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them;
· to reshape our regulatory systems so that our authorities are able to identify and take account of macro-prudential risks;
· to extend regulation and oversight to all systemically important financial institutions, instruments and markets. This will include, for the first time, systemically important hedge funds;
· to endorse and implement the FSF's tough new principles on pay and compensation and to support sustainable compensation schemes and the corporate social responsibility of all firms;
· to take action, once recovery is assured, to improve the quality, quantity, and international consistency of capital in the banking system. In future, regulation must prevent excessive leverage and require buffers of resources to be built up in good times;
· to take action against non-cooperative jurisdictions, including tax havens. We stand ready to deploy sanctions to protect our public finances and financial systems. The era of banking secrecy is over. We note that the OECD has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information;
· to call on the accounting standard setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards; and
· to extend regulatory oversight and registration to Credit Rating Agencies to ensure they meet the international code of good practice, particularly to prevent unacceptable conflicts of interest.

This just in from our Man In London, William Underhill, fresh from the G20:

April 2, aaaaand we're back to reality. Here's Newsweek's daily serving of news and views from around the world, G20-style.

Let the Games Begin!: Starting off with a mea culpa press conference wasn't enough to get Obama off the hook. Resistance to U.S. plans is coming in from all directions, but especially from a newly chummy France and Germany, who are calling for regulatory overhaul. As the WSJ put it, Obama had an easier time with former Cold War combatants than he's having with his allies. Their best bet for consensus is on tax havens. Yikes.

G20's Dirty Little Secret: No, seriously, it gets worse. FT's wicked smart Gillian Tett writes that the G20 big dogs are (shock!) failing to address the crisis-causing elephant in the room: toxic assets. As she quotes one anonymous "senior global policy official" griping: "The Americans are hiding behind stimulus and the Europeans are hiding behind regulatory reform. But that misses the real issue."

Forking It Over: The IFC, the World Bank's private sector arm, is coughing up $5 billion for banks that finance trade in developing countries, hoping their move will inspire altruism among the other reps at the G20 summit.

A New Chinamerica: Last week, we linked to Brad Setser's RIP post for Chinamerica. This week, we bring you an alternative view from PostGlobal's John Pomfret, who sees Obama and Hu positioning themselves as the twin saviors of the global economy. Perhaps it's the end of a beautiful friendship, but just the beginning of love.

Avoiding Another 'Trillion-Dollar War': Hark! The U.S. government has a plan to contain Iran, keep the Middle East stable, and keep costs in check. Sound too good to be true? It should, because it involves selling lots of military hardware to these guys. David Axe thinks through the long-term costs and benefits.