The US Treasury Secretary Timothy Geithner advised the International Monetary Fund to strengthen its surveillance of exchange rates policies and accumulation reserves to issue timely warnings to countries undervaluing their currency or accumulating massive surpluses while addressing IMF annual meeting on Saturday.
Earlier this week on Thursday IMF Chief Dominique Strauss-Kahn said that IMF should Initiate a “systemic stability initiative” to reinforce monitoring.
The USA has tried tact, rhetoric and US congress has even passed bills to impose tariffs on imports from those countries that underrate their currency to boost their exports. Realizing the negative impact of standing up alone USA is now trying to build support of other countries and international monetary agencies for their strategy to restrain countries from undervaluing their currency.
US, Japan and Europe are disappointed by the speed of Chinese move toward its planned currency reform that is leading to increasing risk of competitive currency devaluations around the world.
Geithner’s remarks were directed toward China that is alleged for artificially keeping their yuan underrated by purchasing large amounts of dollars to advance their exports that creates global trade imbalance but Geithner refrained from naming the country.
Latest IMF figures demonstrate that China holds almost 30 percent of the global reserve amounting to 2.447 trillion dollars, which is the largest in the world.
Without referring to China, The US Treasury secretary remarked, “Countries that chronically run large surpluses need to undertake policies that will boost their domestic demand. And it is critical to see more progress by the major emerging economies to more flexible, more market-oriented exchange rate management. This is particularly important for those countries whose currencies are significantly undervalued.”
Geithner argued, “One of the IMF’s core functions is to undertake rigorous surveillance of the international monetary system, specifically, the IMF must strengthen its surveillance of exchange-rate policies and reserve accumulation practices… excess reserve accumulation on a global scale is leading to serious distortions in the international monetary and financial system, and is inhibiting the international adjustment process”.
Geithner emphasized that emerging markets should enhance domestic demand instead of exports and developed countries like USA should increase savings to restore global economy.
“The United States is doing and will do its part to achieve this adjustment towards more balanced growth. But as America saves more, countries overly reliant on exports for their own growth will need to change their policies, or else global growth will slow and all of us will be worse off.” Geithner said.
The current currency situation reminds one of a famous book “Currency War” that depicted Western countries as being eventually controlled by a group of private banks, the book also accurately forecasted US banking crisis in 2008.
Ibrahim Sajid Malick is a Pakistani-American writer, technologist, and social entrepreneur. He has been writing on Pakistani society and politics since 1986. He has held several media, communications, and technology positions for organizations large and small. Mr. Malick graduated from New School for Social Research with a master’s degree in anthropology. He holds several technology and management certifications. He works for a leading technology firm and blogs at www.ibrahimsajidmalick.com
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