According to a report prepared for the meeting of finance ministers from the Group of Seven developed economies with inflexible currencies should consider the possibility of strengthening them, if the global economy will be spared the impact of spending U.S. and Asian economies.
"Countries with inflexible nominal exchange rate should allow greater flexibility in the real exchange rate or through higher inflation, either due to the higher value of its currency," - says the document, provided by Bloomberg News by the Ministry of Finance of Canada.
The finance ministers of G-7 and central bankers met on February 6 in Iqaluit, Canada, as well as politicians try to avoid further distortions, such as the U.S. trade deficit and China's current account surplus, which economists blamed for exacerbating the worst post-war recession.
"While global imbalances are not the main cause of the financial crisis, there is little doubt that they played an important role in the recession, which we encountered. In order for global growth to be sustainable, it must be balanced. "
The report did not mention which countries have elements inflexibility of the exchange. China has incurred criticism from foreign governments this year due to the fact that limited the growth of its currency since July 2008, after the preceding three years, letting the yuan strengthen 21%.
"Freedom of Choice
While countries have a right to its own monetary policy, "the freedom to choose its exchange rate mechanism has an obligation not to manipulate the exchange in such a way as to obtain a competitive advantage" - the document says.
Governments and central banks want to avoid a repetition of expansion, when U.S. consumers have relied on borrowing abroad to finance their purchases, stimulating, thus, the export boom in Asia. As China and other Asian countries have accumulated dollars because of the high trade surplus, they bought U.S. Treasury bonds, exerting pressure on the yield on them. Reducing the cost of borrowing supported the U.S. housing and credit bubble exploded in 2007.
Canadian Finance Minister Jim Flaherty (Jim Flaherty) said yesterday in an interview about when the world is going to become more balanced, he "can not tolerate" with "relatively hard currencies.
U.S. Treasury Secretary Timothy Geithner (Timothy F. Geithner) said days ago that Chinese officials understood that a more flexible exchange rate for their own economy, Geithner described such changes as "probable."
Bubbles in asset
Consumer prices in China rose by 1.9% in December, the most significant growth for the year, GDP grew by 10.7% for the fourth quarter, prompting speculation about the fact that the authorities allow the yuan strengthened to stifle economic growth and bubbles in asset markets.
Nevertheless, for this week, the yuan has fallen more essential only in mid-December, and China rejected the comments from Obama that the yuan should be allowed to be strengthened against the dollar, saying the exchange rate is not strongly affected the U.S. trade deficit .
G-7 should play a leading role in bridging lopsided trade flows, presenting plans to reduce budget deficits, which will help reduce demand for foreign capital and make them more efficient economies, as populations age, the document says G-7.
Fiscal incentives
Although it is too early to abandon fiscal incentives, governments should identify, clear, reliable and consistent, "plans to reduce budgetary debt, the report said. Different structures could set goals to reduce debt and deficit, conduct research to determine the impact of borrowing on the demographics.
Delay in plans can cause markets to "doubts about what the political structure in the medium term will come to raise interest rates," the report said. "This could further complicate the task of re-normalization of monetary policy and create another source of uncertainty."
"Countries with inflexible nominal exchange rate should allow greater flexibility in the real exchange rate or through higher inflation, either due to the higher value of its currency," - says the document, provided by Bloomberg News by the Ministry of Finance of Canada.
The finance ministers of G-7 and central bankers met on February 6 in Iqaluit, Canada, as well as politicians try to avoid further distortions, such as the U.S. trade deficit and China's current account surplus, which economists blamed for exacerbating the worst post-war recession.
"While global imbalances are not the main cause of the financial crisis, there is little doubt that they played an important role in the recession, which we encountered. In order for global growth to be sustainable, it must be balanced. "
The report did not mention which countries have elements inflexibility of the exchange. China has incurred criticism from foreign governments this year due to the fact that limited the growth of its currency since July 2008, after the preceding three years, letting the yuan strengthen 21%.
"Freedom of Choice
While countries have a right to its own monetary policy, "the freedom to choose its exchange rate mechanism has an obligation not to manipulate the exchange in such a way as to obtain a competitive advantage" - the document says.
Governments and central banks want to avoid a repetition of expansion, when U.S. consumers have relied on borrowing abroad to finance their purchases, stimulating, thus, the export boom in Asia. As China and other Asian countries have accumulated dollars because of the high trade surplus, they bought U.S. Treasury bonds, exerting pressure on the yield on them. Reducing the cost of borrowing supported the U.S. housing and credit bubble exploded in 2007.
Canadian Finance Minister Jim Flaherty (Jim Flaherty) said yesterday in an interview about when the world is going to become more balanced, he "can not tolerate" with "relatively hard currencies.
U.S. Treasury Secretary Timothy Geithner (Timothy F. Geithner) said days ago that Chinese officials understood that a more flexible exchange rate for their own economy, Geithner described such changes as "probable."
Bubbles in asset
Consumer prices in China rose by 1.9% in December, the most significant growth for the year, GDP grew by 10.7% for the fourth quarter, prompting speculation about the fact that the authorities allow the yuan strengthened to stifle economic growth and bubbles in asset markets.
Nevertheless, for this week, the yuan has fallen more essential only in mid-December, and China rejected the comments from Obama that the yuan should be allowed to be strengthened against the dollar, saying the exchange rate is not strongly affected the U.S. trade deficit .
G-7 should play a leading role in bridging lopsided trade flows, presenting plans to reduce budget deficits, which will help reduce demand for foreign capital and make them more efficient economies, as populations age, the document says G-7.
Fiscal incentives
Although it is too early to abandon fiscal incentives, governments should identify, clear, reliable and consistent, "plans to reduce budgetary debt, the report said. Different structures could set goals to reduce debt and deficit, conduct research to determine the impact of borrowing on the demographics.
Delay in plans can cause markets to "doubts about what the political structure in the medium term will come to raise interest rates," the report said. "This could further complicate the task of re-normalization of monetary policy and create another source of uncertainty."
Bloomberg
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