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governing the global economy « Previous | |Next »
September 24, 2003

My judgement from reading The Australian Financial Review (subscription required) is that the world economy is in poor shape (little growth ) and is need of some therapy. The suggested remedy being suggested is exchange rate flexibility for Asian countries in the Asia-Pacific Rim to promote smooth and widespread adjustments in the international financial system. So said the G7 Finance Ministers meeting in Dubai.

What does that mean? The communique needs interpreting because the G7 see themselves as the centre of global governance. At one level it means that markets rather than governments ought to determine currency values. What does that mean in terms of power politics? It can be interpreted as the US calling on Japan and China to loosen their managed currency regimes.

This feeds into American protectionist sentiment as the 2004 Presidential election approaches,. The protectionists say that Asia's cheap currencies equal US job losses. Hence Asian currencies (eg., China) should be forced to let their currencies appreciate.

After all, their argument goes, the common Asian growth strategy is based on weak exchange rates, and the low cost of capital for a privileged but outward looking manufacturing sector. The traditional resistance to the Asian countries' currency rising against the dollar(eg., Japan) has got to stop, say the protectionists, because the US is suffering from a jobless recovery. China is in their firing line.

Have we got the global currency wars as nation states battle it out?

| Posted by Gary Sauer-Thompson at 1:39 PM | | Comments (2)


Hey, Sauer-Thompson, you suck!

Ha ha ha ha ha ha ha ha ha ha!

what can I say?

I like your style?