G20 leaders solve minor problems. The Currency War continuous

G20 summit in Seoul was dominated by conflicting interests of the participating countries, the leaders failed to reach a consensus on the most important items on the agenda.

G20 has failed to end the “war of exchange” between the U.S. and China to start applying a uniform set of policies would be followed to establish an institutional framework for concerted macroeconomic policies designed to reduce the risk of new onset of global economic crisis.

“Not the best time of the G20. Unit during the financial crisis has been replaced by division. Own interests have replaced the common policies,” said Eswar Prasad, a professor at the University Cornwell.

United States seems to have lost a large part of the allies after the Federal Reserve triggered the second wave of quantitative relaxation policy. Leaders of emerging markets such as Brazil, Indonesia and South Korea fear that the 600 billion dollars that the Fed will buy U.S. bonds will devalue the dollar by about 20% and that will trigger bubbles.
Consequently, the communiqué issued at the end of the meeting gave the green light to limited markets such potentially speculative capital flows. States’ flexible exchange rates are free to take macroeconomic measures “to reduce the negative effects of these capital flows, says the document.

Importers versus exporters
United States, backed by South Korea, faced with powerful opposition from major exporters such as China or Germany, for proposing to limit the current account surpluses and deficits. Washington has tried to improve the atmosphere created by monetary policy, proposing the establishment of rules that limit the current account surpluses or deficits to a percentage of GDP.
The program, to be developed by economists at the IMF, could include the monitoring of current account imbalances, exchange rates or labor costs.
Tensions on currency and trade imbalances will not be solved overnight. Discuss these policies at the multilateral negotiations without resorting to harsh, “says British Prime Minister David Cameron. After all these disagreements, the leaders have managed to set a timetable for the crystallization of a set of indicators to monitor and identify the major economic imbalances early in the year 2011.

Insignificant Wins

Politicians attending the Seoul tried to justify their visit to the capital of South Korea by concluding agreements in the fields on the outskirts of agendas for discussion.
Politicians have established an institutional framework to articulate the most important banks in countries like Germany, Japan, the United States and France, whose slippage could significantly affect the global economy.
Also, leaders have reformed the mechanism of the IMF, giving emerging markets a much stronger voice in this financial institution. The measure was taken more to legitimize measures credibiliza and usually tougher, they apply to that institution.
Although it received harsh criticism from bankers, officials have reached a consensus and will gradually introduce national legislation of Member States so-called Basel rules III, whose provisions, say representatives of the banking system will limit profits and will minimize banks’ ability to provide value-added innovative products.
Politicians have taken important steps to remove barriers and protectionism and claimed that next year is an “opportunity” to resume negotiations in Doha.
The next meeting of the G20 will be held late next year under the patronage of French President Nicolas Sarkozy, who will have to act as mediator in the “war exchange.

What happened to the G20?  G20 gave the green light to restrict flows of capital markets with speculative potential.

G20 leaders have reformed in the operating mechanism of the IMF, giving emerging markets a much stronger voice in this financial institution.
G20 I decided to create and implement a set of indicators to monitor and identify early major economic imbalances.
n leaders will monitor the policy of the leading banks in the world.
Officials have not reached agreement on a set of rules Basel III.
Politicians have made great strides in the elimination of protectionist barriers.

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Posted by M Cosmin on Nov 15 2010. Filed under Featured News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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