Sunday, October 24, 2010

One honest man

So the G20 isn't going to engage in the currency war that's already raging. The US wants a "strong dollar" and China "market-determined exchange rates". All countries are going to consider the Geithner imbalances plan already rejected. Is it this blog or did the G20 just hit new heights of Orwellian double-speak?

Anyway, came across this speech by BOE gov, Mervyn King, which was delivered to some Midlands merchants before he got on the plane. It's a little more honest:
At the G7 meeting in October 2008, I was part of the group of ministers and central bank governors who threw away the prepared communiqu̩, and replaced it by a bold short statement of our determination to work together. That spirit, so strong then, has ebbed away. Current exchange rate tensions illustrate the resistance to the relative price changes that are necessary for a successful rebalancing. The need to act in the collective interest has yet to be recognised, and, unless it is, it will be only a matter of time before one or more countries resort to trade protectionism as the only domestic instrument to support a necessary rebalancing. That could, as it did in the 1930s, lead to a disastrous collapse in activity around the world. Every country would suffer ruinous consequences Рincluding our own.

The whole thing is worth a read to remind us of how big the challenge ahead is. This blogger must ask the question again: If the logical historical outcome is that the US is going to impose trade sanctions, then shouldn't we be supporting a break in the yuan peg now?
Mervyn King

1 comment:

Economic Delusion said...

I heard that the the Germans called out Giethner at the G20 stating that GE was in fact Currency manipulation.

The problem was that the german who did it wasn't actually the finance minister. He was a stand in from the ministry of Science and Tech , who was there because the original minister was ill.

Funny how it takes an outsider to state the truth !!