News / Economy

IMF Meeting Stokes Fear of Currency War

Multimedia

Fears of a global currency war have increased after the meeting of finance leaders at the International Monetary Fund in Washington last week. Talk of trade imbalances and uneven growth due to artificially low currencies has already sparked discussions about possible intervention.  Analysts say it's an issue that's not likely to go away anytime soon. 

As nations emerge from the global downturn, it's becoming clear that some countries are recovering faster than others.

In its most recent outlook, the International Monetary Fund says growth in developed countries will remain sluggish - even as emerging economies, especially those in Asia, are booming.

Last week, World Bank President Robert Zoellick warned that uneven growth is causing friction.

"We see this now in debates on currencies: developed countries are easing monetary policies; some developing countries are tightening in response to growth; some surplus countries are intervening to lower the value of their currencies to boost exports," he said. "And all this is causing international tensions."

The failure of finance ministers to come up with solutions last week in Washington has only deepened the divide. IMF managing director Dominique Strauss-Kahn.

"Many are talking about a currency war," he said. "Myself, I think I use this vocabulary which may be a bit too military. But it's true to say that many do consider their currency as a weapon and that's certainly not for the good of the global economy."

The US, for example, blames China's undervalued currency for contributing to the massive trade imbalance between the two.  

And countries such as Japan and Brazil have threatened to devalue their currencies to gain a competitive edge in exports.

Economist Toby Nandle says it's a big problem with no easy solutions.

"This is not a problem that can be delegated to an international organization such as the IMF," he said. "It's a problem that needs to be addressed by heads of state and by finance ministers because the resolution of said problem has profound affects on different economies."

Among them, China.  

Beijing has pledged greater flexibility in determining the value of the yuan. But Chinese premier Wen Jiabao says it will not happen overnight.

"Without this stability of the RMB exchange rate, there would be no stability for businesses, for employment, for our people, and also, if China has social and economic problems, it would be a disaster for the world," he said.

Experts say currency disputes have already jumped to the top of the queue as world leaders prepare for the G-20 summit in South Korea.  Barring a resolution, Nandle says the warning from Brazil could become reality.

"If there is no agreement by November 12th as to the global disconnect, I think that Guido Mantego [Brazil's Finance Minister] hit the nail on the head - we have a global currency war underway," he said.

Governments can devalue their currencies in different ways - from giving their central banks the ability to set margins on exchange rates to buying up foreign currencies to lower demand for their own.  

Economists say the resulting fluctuations would have serious implications for trade, causing nations to demand additional tariffs, and even blockades, against cheap imports.  

Such laws would hurt trade, further delaying a global recovery.

You May Like

At International AIDS Conference One Goal, Many Paths

The 12,000 delegates attending 20th International AIDS Conference in Melbourne have vastly different visions about how to eradicate disease More

Disasters May Doom Malaysia’s Flag Carrier

Even before loss of two jets loaded with passengers on international flights, company had been operating in red for three years, accumulating deficit of $1.3 billion More

Afghan Presidential Vote Audit Continues Despite Glitches

Process has been marred by walkouts by representatives of two competing candidates, Abdullah Abdullah and Ashraf Ghani More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Nature of Space Exploration Enters New Agei
X
Elizabeth Lee
July 20, 2014 2:36 AM
Forty-five years ago this month, the first humans walked on the moon. It was during an era of the space race between the United States and the Soviet Union. World politics have changed since then and -- as Elizabeth Lee reports -- so has the nature of space exploration.
Video

Video Nature of Space Exploration Enters New Age

Forty-five years ago this month, the first humans walked on the moon. It was during an era of the space race between the United States and the Soviet Union. World politics have changed since then and -- as Elizabeth Lee reports -- so has the nature of space exploration.
Video

Video Chicago’s Argonne Lab Developing Battery of the Future

In 2012, the U.S. Department of Energy’s Office of Science awarded a $120 million grant to a new technology center focused on battery development - headquartered at Argonne National Laboratory in suburban Chicago, Illinois. As VOA’s Kane Farabaugh reports, there scientists are making the next technological breakthroughs in energy storage.
Video

Video In NW Pakistan, Army Offensive Causes Massive Number of Displaced

Pakistan’s army offensive in North Waziristan has resulted in the large-scale displacement of the local population. VOA's Ayaz Gul reports from northwest Pakistan where authorities say around 80 percent of the estimated 1 million internally displaced persons [IDPs] have settled in Bannu district, while much of the remaining 20 percent are scattered in nearby cities.
Video

Video Kurdish Peshmerga Force Secures Kirkuk, Its Oil

The Kurdistan regional government has sent its Peshmerga troops into the adjacent province of Kirkuk to drive out insurgents, and to secure the area's rich oil fields. By doing this, the regional government has added a fourth province to the three it officially controls. The oil also provides revenue that could make an independent Kurdistan economically strong. VOA’s Jeffrey Young went out with the Peshmerga and filed this report.
Video

Video Malaysia Reeling: Second Air Disaster in Four Months

Malaysia is reeling from the second air disaster in four months involving the country’s flag carrier. Flight 340 vanished in March and despite an extensive search, no debris has been found. And on Thursday, Flight 17, likely hit by a surface-to-air missile, came apart over eastern Ukraine. The two incidents together have left more than 500 people dead. VOA Correspondent Steve Herman reports from Kuala Lumpur.
Video

Video Diplomatic Crisis Grows Over MH17 Plane Crash

The Malaysia Airlines crash in eastern Ukraine is drawing reaction from leaders around the world. With suspicions growing that a surface-to-air missile shot down the aircraft, there are increasing tensions in the international community over who is to blame. Henry Ridgwell reports for VOA from London.
Video

Video Undocumented Immigrants Face Perilous Journey to US, No Guarantees

Every day, hundreds of undocumented immigrants from Central America attempt the arduous journey through Mexico and turn themselves over to U.S. border patrol -- with the hope that they will not be turned away. But the dangers they face along the way are many, and as Ramon Taylor reports from the Rio Grande Valley in Texas, their fate rests on more than just the reception they get at the US border.
Video

Video Scientists Create Blackest Material Ever

Of all the black things in the universe only the infamous "black holes" are so black that not even a tiny amount of light can bounce back. But scientists have managed to create material almost as black, and it has enormous potential use. VOA’s George Putic has more.
Video

Video Fog Collector Transforming Maasai Water Harvesting in Kenya

The Maasai people of Kenya are known for their cattle-herding, nomadic lifestyle. But it's an existence that depends on access to adequate water for their herds and flocks. Lenny Ruvaga reports for VOA, on a "fog collector."

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.