A bold American plan to redress “global imbalances” in international trade and limit the surpluses that can be run by nations such as China was yesterday rejected out of hand.
Timothy Geithner, US Treasury Secretary, had hoped that a letter to finance ministers attending the G20 summit in Korea might be seen as an acceptable way to end the row over the valuation of currencies that has escalated in recent weeks.
“G20 countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth and support global demand,” Mr Geithner’s letter said.
“Emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals.”
The final draft, after China, Japan and Germany (all stronger economies based on Mercantalist principles) shot down the US proposal includes this, “Excessive state interference in currencies should be avoided.”
Right, because the US has a private, quasi-public means to interfere with currencies. And the US response is going to be manipulating the dollar through quantitative easing…which it was doing before it decided currency “manipulation” was real bad.
I do find it funny that DC was all for China doing exactly what it’s doing now not too many years ago. Now that we’ve been screwed by our own short-term thinking we’re mad as hell and not gonna take it!