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Yes, it's a currency war, and No, no one is doing anything about it
09/30/2010 10:15 am EST
“We’re in the midst of an international currency war,” warned Brazil’s finance minister Guido Mantega on September 27. Governments around the world are competing to drive down their currencies to boost their exports.
How dangerous could that be? Well, in my September 20th post I compared the destructive potential of a global beggar your neighbor currency war to the Smoot-Hawley tariff of 1930 that helped turn the stock market crash of 1929 into the Great Depression. (See my post http://jubakpicks.com/2010/09/21/japans-intervention-to-drive-down-the-yen-is-more-dangerou-than-it-looks-remember-smoot-hawley-and-the-great-depression/ )
Brazil’s finance minister didn’t name names but last week the country’s foreign minister Celso Amorim went to great lengths to defend China from charges that kept its currency artificially depressed. After a meeting of the BRIC countries of Brazil, Russia, India, and China he said, “I believe that this idea of putting pressure on a country is not the right way for finding a solution.” And then he added “We can’t forget that China is currently our main customer.”
That’s almost exactly the same language used by South Korean Finance Minister Yoon Jeung-hyun. The upcoming G20 summit on November 11 and 12 might take up exchange rates in general, he said, but call out China’s yuan policy? No way.
“I do not believe that it is appropriate to have a discussion regarding the foreign exchange rate or level of a specific country,” Yoon said in an interview with Reuters on September 23.
South Korea hosts the November G20 summit of the world’s major economies.
It certainly seems that when United States makes its arguments in Seoul that China needs to let the yuan appreciate almost nobody will be listening.
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