Everybody agreed that a currency war was a “bad thing” but each country – of course – denied that it would ever indulge in such a thing. All agreed that the world was a dangerous place and that there were “grave imbalances”. The US blamed China and China blamed the US but they did try to engage and tone down the earlier rhetoric. It started a little acrimoniously but ended with fine words and a task passed on to the IMF to set “indicative” guidelines.
It is no doubt a “good thing” that the leaders do meet and at least try to think a little outside the box but few have the ability to look much beyond immediate domestic issues and domestic politics. The European leaders did at least have a “break out” meeting to address the problems in Ireland.
G20 leaders closed ranks Friday and agreed to a watered-down commitment to watch out for dangerous imbalances, yet offered investors little proof that the world was any safer from economic catastrophe.
The developing and emerging nations agreed at the summit in Seoul to set vague “indicative guidelines” for measuring imbalances between their multi-speed economies but, calling a timeout to let tempers cool, left the details to be discussed in the first half of next year.
Leaders vowed to move toward market-determined exchange rates, a reference to China’s tightly managed yuan that the United States has long complained is undervalued.
They pledged to shun competitive devaluations, a line addressing other countries’ concern that the U.S. Federal Reserve’s easy-money policy was aimed at weakening the dollar.
In a nod to emerging markets struggling to contain huge capital inflows, the G20 gave the okay to impose “carefully designed” control measures. They also agreed that there was a critical, but narrow, window of opportunity to conclude the long-elusive Doha round of trade liberalization talks launched in 2001.
After weeks of verbal jousting, the United States and China sought to bury the hatchet over rows about China’s “undervalued” currency and the global risks created by the U.S. printing money to reflate its struggling economy. “Exchange rates must reflect economic realities … Emerging economies need to allow for currencies that are market driven,” Obama said. “This is something that I raised with President Hu (Jintao) of China and we will closely watch the appreciation of China’s currency.”
Tim Condon, head of research at ING Financial Markets in Singapore said it was “hard to disagree” with the vows of the leaders but they had fallen short of the progress hoped for going into the summit.
“They decided just to put down a lot of laudable objectives as the conclusion of the meeting and hope that they can do better, that more can be accomplished in future meetings,” he said. The G20 has fragmented since a synchronized global recession gave way to a multi-speed recovery. Slow-growing advanced economies have kept interest rates at record lows to try to kickstart growth, while big emerging markets have come roaring back so fast that many are worried about overheating.
But at least the G20 spouses apparently had a good time in what looks like sunny autumn weather!
The spouses of G20 world leaders walk through a park in Seoul November 12, 2010. Credit: REUTERS/Yonhap/Pool SOUTH KOREA
The k2p blog 