G-20 Spars Over Currency Values, Trade Imbalances To Obama's Chagrin
But, as Obama is seeing often these days, no one is listening. They have their own interests at heart.
The Wall Street Journal reports: "Several [G-20 countries], including Germany, accused the Federal Reserve of driving down the value of the dollar, particularly through a controversial new program to buy $600 billion of U.S. government bonds and other assets. The criticism spread, with countries across three continents challenging the U.S.'s economic policies."
German Finance Minister Wolfgang Schäuble elaborated:
"The Fed's decisions bring more uncertainty to the global economy. They make it more difficult to achieve a reasonable balance between industrialized and emerging economies, and they undermine the US's credibility when it comes to fiscal policy. It's inconsistent for the Americans to accuse the Chinese of manipulating exchange rates and then to artificially depress the dollar exchange rate by printing money."
His comments on the U.S./China relationships get to one of the main power struggles which will definite the G-20's upcoming meeting, due to start Thursday in Seoul. It's all about our trade deficit with China (and to a lesser extent, the rest of the world).
Prominent U.S. economic theorists, including Treasury Secretary Timothy Geithner and former World Bank chief economist Joseph Stiglitz, say that China is playing fast and loose with its currency, the yuan, creating an unfair advantage.
The Christian Science Monitor explains: "The US has asked China to let its currency value rise (it claims China is keeping its currency value unnaturally low) in order to make US goods cheaper, relatively, and increase demand for US exports. China has not been receptive to the idea."
Still the world's prevailing economic superpower, America is playing both sides with its own currency. The Fed wants the dollar to remain the standard currency for global trade, but is now diluting the value of the dollar by essentially printing and investing lots more money into the market.
It's not working so well.
The Journal says: "The U.S. looks set to get just what it doesn’t want — a strong dollar. By introducing more quantitative easing last week, the Federal Reserve might well have been hoping for a further decline in the U.S. currency to help boost the economic recovery alongside the increased monetary kick that a $600 billion dose of bond buying will give."
Another plan on the table at the G-20 Summit, proposed by Geithner, would limit the trade surpluses of countries like China and Germany, who are exporting a whole lot more goods than they import.
Both countries have made it clear that it's not in their best interest to limit their own growth, something the U.S. is struggling to counter. The G-20 countries are finding that they have less common interest as they make divergent decisions on how much to spend/save, how much to borrow, and who to build trade relationships with.
A spirit of cooperation is not going cut it at this year's Group of 20 meeting.
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