February 13, 2004
IN AFTERMATH OF G-7 MEETING, FOCUS IS ON DOLLAR,
differences" within G-7 prevent "concrete action" on world
** Europe is "paying
the bill" for the U.S.'s "expansionist" fiscal and monetary
** Asian countries are
facing "greater pressure" to revalue their currencies.
Consensus 'far from evident' in G-7-- Meeting in an atmosphere "clouded by the
continued drop" in the dollar compared to the yen and euro, the meeting of
G-7 finance ministers in Feb. 6-7 "failed to address fundamental
imbalances endangering the stability of the global system." Ministers arrived in Florida "largely in
disagreement" about the dangers facing the global economy, noted Italy's
leading business daily Il Sole-24 Ore.
"Diverging interests" among the participants left them unable
to agree on concerted action and "chiefly for political reasons" they
opted for a "propaganda exercise" aimed at influencing markets. Though their final communiqué called for
"healthy" budget policies and "flexibility" in exchange
rates, it "was the fruit of intense compromises." France's centrist, financial La Tribune
fretted that the message might be "too subtle" and therefore not have
"enough weight in the financial markets."
Dollar's decline a 'threat to the eurozone'-- European dailies complained that "the
U.S. government has no interest in strengthening the dollar," leaving the
eurozone to "bear the full burden" of the greenback's decline. Germany's left-of-center Berliner Zeitung
labeled the U.S.' "careless dealing" with its currency
"disturbing." Other analysts
held that large U.S. budget and current-account deficits showed "America
is living beyond its means" and worried "the world economy is heading
for a crash" if the U.S. doesn't change course. Writers agreed that "nothing is going to
change" about the "super-euro and mini-dollar" in the near term,
with Washington hoping to boost growth with its "cheap
currency." Conservative outlets in
the UK took a contrarian view, saying the dollar's decline "should benefit
both America and other countries" by helping the U.S. reduce its
"vast" current-account deficit.
'Cheap' dollar threatens Asian recovery-- Asian papers questioned if the dollar's
decline could be "managed...without major dislocation to the world's
economy." They interpreted the G-7
ministers' call for exchange rate flexibility as "encouragement for Asian
countries to let their currencies" trade more freely against the dollar to
"ease the pressure on European economies." The G-7 "made a thinly veiled
appeal" for revaluation of the Chinese yuan, judged Hong Kong's
independent South China Morning Post.
Singapore's pro-government Straits Times cited "election
politics" in the U.S. as the "unseen hand" behind an attempt by
the G-7 to "place the burden on China to do its part" in adjusting
exchange rates. Japanese papers feared a
rising yen "will hit export-oriented Japanese businesses hard." Commentators said further declines in the
dollar would deal "a serious blow" to Japan's "emerging
recovery." They urged the U.S. to
"take concrete action to reduce the deficit and regain" the
confidence of global markets.
EDITOR: Steven Wangsness
EDITOR'S NOTE: This
analysis is based on 32 reports from 15 countries, February 2-11, 2004. Editorial excerpts from each country are
listed from the most recent date.
BRITAIN: "Let The
An editorial in the independent weekly Economist read
(2/7): "The real problem facing the
world economy is not suddenly a weak dollar, but a dollar which remains, even
after its recent decline, too strong.
The drop in the greenback was inevitable and should benefit both America
and other countries, because it will help to reduce America's vast
current-account deficit, which is arguably one of the biggest threats to the
global recovery.... Europeans, however,
complain that the burden of adjustment has fallen disproportionately on their
currency, the euro.... The
current-account deficit is a direct, arithmetical reflection of insufficient
domestic saving. In particular, America needs
to prune its government budget deficit....
America must bear much of the blame for its failure to do anything to
curb household and government borrowing and so boost saving.... Sooner or later, though, America will have to
face up to its own responsibilities, too."
"Dollar's Threat To Eurozone"
Wolfgang Munchau commented in the independent Financial Times
(2/2): "One question came up again
and again at the recent meeting of the World Economic Forum at Davos: why are the Europeans not more worried about
the dollar?... The truth is that neither
the U.S. administration nor the Federal Reserve has the slightest interest in
preventing an adjustment process that is ultimately right for the U.S. economy
and for the world economy at large....
So why are the Europeans not panicking?
One reason is that the large exporters have hedged their currency
exposures, so there is little pressure from the export lobby.... Another reason is that no single individual
or institution feels responsible for the eurozone's economic growth.... A sharp depreciation of the dollar would be
the kind of shock that could mercilessly expose the weaknesses of the
eurozone's system of economic governance."
FRANCE: "G-7 Crossword
Herve Nathan observed in left-of-center Liberation
(Internet version, 2/9): "The G-7
finance ministers meeting has a tradition:
whatever its result, it invariably concludes with congratulations and
messages of self-congratulation on the part of participants.... The one that took place in Boca Raton...did
not fail to honor the custom in a situation clouded by the continued drop in
the value of the dollar compared to the yen and the euro.... To achieve such unanimity, the drafting of
the final communiqué was the fruit of intense compromises among the
delegations.... The Europeans had come
to Boca Raton with the intention of obtaining a commitment from the United
States to reduce its twin deficits (budget and balance of payments), which are
causing the threat of a brutal rise in interest rates, and therefore pose a
threat to world growth. The communiqué
indeed mentions that 'healthy budget policies are essential'.... [U.S. Treasury Secretary] John Snow [says]
the text is 'absolutely consistent with the dollar policy that I have asserted
on many occasions.' Washington, eight
months away from elections, will therefore not change its economic
"Things Well Taken Care Of"
Bruno Dranesas commented in centrist, financial La Tribune
(Internet version, 2/9): "The
communiqués from the G-7 are documents of prime importance for the financial
markets. They are believed, at least in
principle, to give the rules of the game that the seven richest countries in
the world intend to follow in order best to promote world growth. The best way to achieve that is to play as a
group, displaying strong cooperation.
The clearer the message, the more the markets know what to make of
it. The greater the political
determination, the weaker the temptation of the financiers to go against
it. But, in the Boca Raton case,
consensus was far from being evident, so out in the open were the diverging
interests for several days. In an
election year, George W. Bush had no reason to stabilize the euro-dollar
exchange rate, since the fall of the greenback gives a boost to U.S. growth. And yet the final communiqué is a
clarification that is as unexpected as it is welcome--provided that the words
have enough weight in the financial markets.
How are the investors going to read this G-7?... Is the Boca Raton agreement going to correct
the misunderstanding in Dubai? Will the
G-7 communiqué not be too subtle for the markets, which will no doubt regret
the absence of a real threat of intervention agreed on by the central banks in
case the dollar slips more? The text has
the weakness of being a 'blank' agreement.
But it has at least the merit of being clear. Will that be enough to convince the
GERMANY: "Betting On
Henrik Mortsiefer editorialized in centrist Der Tagesspiegel
of Berlin (2/10): "Bush is a
gambler. When the President presented
his budget draft he provided the conclusive evidence by inviting Americans and
the rest of the word to a gigantic bet:
Bet that the government manages to boost the global economy until the
presidential election--despite a looted treasury, unbalanced transactions, a
weak dollar and miserable ratings?...
Bush thinks and acts in Ronald Reagan's way, which was a mixture of
laissez faire and making debts. The
state duplicates its citizens in living beyond the means and taking credits
from the next generation--the future taxpayer.
If the Bush government thought about the future at all, then it
speculates that the past will recur....
Alarm bells demonstrate that the U.S. economy can less and less rely on
its own curing powers. If investors lose
confidence in the sustainability of U.S. fiscal policy, the calculation of the
debtor in the White House will no longer work.
Capital, which is financing the current account deficit, would go to
different regions and also Europe had to scrap its recovery hopes. The dollar would further fall, exports lose
U.S. markets, and the stock market would be in turmoil. The American dream would turn into a global
nightmare. But fortunately the bet is
looking good for the president. The
economy is growing, stocks are rising, the dollar is helping U.S. companies
more than it is causing damages. But
even if the debt policy will not cause the finance system to collapse, the
dangers are looming."
"Small Ray Of Hope"
Center-right Frankfurter Allgemeine argued (2/9): "All those members of the G-7, who had
come to Boca Raton hoping that the finance ministers and central bank chiefs
agreed on a coordinated exchange rate policy were disappointed.... But the European finance ministers can
consider it their success that the meeting described 'excessive volatility' and
'uncoordinated movements' of exchange rates as not desired. By doing so, the G-7 showed consideration for
European concerns over allegedly negative consequences of strong ups and downs
of exchange rates and a continued strength of the euro.... But we can certainly consider the meeting as
disappointing with respect to promises that were made to strengthen economic
growth. They do not go beyond the things
what has been included in the various finance and economic policy agendas. U.S. Treasury Secretary Snow, for instance,
reiterated the intention to halve the U.S. budget deficit within the coming
"Now the Central Bank Must Step In"
Carsten Broenstrup contended in centrist Der Tagesspiegel
(Internet version, 2/9): "At first
glance, what the seven most powerful finance ministers of the Western world
wrote down at their meeting in Florida looks spectacular. They warn in their declaration against
'disorder' and 'exaggeration' on the currency markets. With such drastic vocabulary they will at
best slow down, but not stop, the dollar's exchange rate decline. Yet since the beginning of 2002, the losses
of the U.S. currency to the euro add up to 29 percent--that greatly worries
above all export-oriented German industry.
It could hardly be expected that the G-7 finance ministers would come to
more agreement. The interests of the
three large currency blocs, the United States, Japan and Europe, lie too far
apart. The United States hopes, in the year
of presidential elections, to stabilize its unstable recovery with a cheap
currency. The Japanese do not want have
their timid economic recovery destroyed by revaluing the yen to the dollar--and
try to support the dollar with currency sales.... Thus the euro must bear the full burden of
the dollar's downward pressure. Yet the
price rise of the common currency is becoming a danger for the business climate
there. To reach a more orderly
development of currency rates, the G-7 countries would have had to threaten the
financial markets that, if necessary, they would jointly resist a dollar
decline. That came to naught--so now the
European Central Bank must step in with a currency intervention or a lowering
of the interest rate. That is the last
hope for Europe."
"Europe All Alone"
Marc Hujer judged in center-left Sueddeutsche Zeitung of
Munich (2/9): "More than other
national economies, the U.S. economy is dependent on international investors to
finance its constantly growing budget deficit.
That is why it is not surprising that the Americans accepted the
European wish to include a passage in the final communiqué that condemns
extreme exchange rate fluctuations. This
is to reassure the finance markets and prevent a drastic increase in the
euro.... This is a great success, mainly
of the Europeans. But it is only a
success for a brief period of time. The
G-7 meeting in Boca Raton was unable to hush up the contradicting interests
between European s and Americans. Each
side is interested in not making one's own currency too strong.... It is not the low dollar exchange rate that
is worrying the Americans, it is not rising inflation, and they obviously think
that confidence in the dollar continues to exist.... But in the end, the Europeans will again be
left in the lurch as the ones who suffer the most from a declining dollar
exchange rate.... The Europeans can now
only help themselves. They must now
search for ways and means to protect themselves from declining dollar exchange
rates. The G-7 meeting in Boca Raton did
not change this."
"The Entire World Pays For It"
Stephan Kaufmann wrote in left-of-center Berliner Zeitung
(2/6): "G-7 ministers will not be
able to compromise in favor of a stronger dollar. As a result the dollar will remain weak, which
will make Europe and Japan unhappy; not just because exports hopes falter. The careless dealing of the U.S. with its
currency is disturbing. The surging
deficit causes the dollar to fall. As
long as the U.S. relentlessly uses the world dominance of the dollar to take up
money for its war on terror, the financial markets are shattered and dollar
assets devalued around the world. With
this devaluation, the U.S. forces the entire world to pay for the war."
"No Miracle In Boca Raton"
Torsten Riecke editorialized in business daily Handelsblatt
of Duesseldorf (2/4): "The
Europeans hope that the Americans will stop the fall of the dollar and that
they finally reduce their deficits. But
the U.S. government has no interest in strengthening the dollar nor is it
willing to allow anybody to tell it what it has to do. There are elections in America. In this situation, everything that could
disrupt the picture of a healthy economy is swept under the carpet. Japan will stay out of this dispute and
prevent its currency from being evaluated...and China, the other great
manipulator of the currency system, is not even sitting at the negotiating
"The Rhetoric From Boca Raton"
Lucas Zeise noted in business daily Financial Times Deutschland
of Hamburg (2/4): "Act stupid, this
is often a wise tactical maneuver. It is
likely that Treasury Secretary John Snow will resort to it when he meets his
colleagues from the other big industrialized nations in pelican-infested Boca
Raton.... Snow will again simply repeat
the litany of the strong dollar.... The
lack of interest of the U.S. government in stabilizing the dollar exchange rate
has not changed.... The domestic situation
in the United States and the objective fact of a current account deficit that
is going rampant are two strong arguments why a reverse signal will not
spring...for the foreign exchange market."
"The Debt President"
Washington economic correspondent Marc Hujer filed the following
editorial for center-left Sueddeutsche Zeitung of Munich (2/3): "There are limits for the deficits. As far as politics is concerned, because
state expenditures cannot satisfy all people; as far as the economy is concerned,
because the economy can balance debt only to a certain degree.... Already now America is living beyond its
means, be it the high indebtedness of the consumers, be it trade with the rest
of the world.... We do not have to be
too pessimistic to come to the conclusion that the global economy will be
heading for a crash if the United States continues its debt policy
unimpeded.... Bush is not worried about
the deficit. It is evidence of the fact
that George W. Bush takes action, that he, unlike his father, thinks of those
who are disadvantaged. If the economy
goes along until with such policy to the election day, his deficit could even
be a secret trump card."
ITALY: "An Out-of-Tune
Enzo Grilli took this view in leading, business daily Il
Sole-24 Ore (2/8): "Europe and
the United States have indulged together in turning a blind eye to exchange
rates, the former allowing the euro to appreciate without stepping in, and the
letter letting the dollar depreciate with apparent unconcern. The result is that the U.S. currency has lost
40 percent of its value against its European counterpart since the beginning of
2002. Only recently has ECB [European
Central Bank] Governor [Jean-Claude] Trichet come round to describing this
exchange rate shift as 'drastic.' Before
that, the pretense of not seeing was kept up.... It naturally suited Europe for the United
States to be pulling economic recovery along, but the bill for highly expansive
U.S. fiscal and monetary policies has promptly been presented to Europe in the
form of a dollar continually losing value, primarily against the euro.... The ministers thus came to the meeting in
Florida largely in disagreement as to the diagnosis of the dangers faced
and...with the Americans and Europeans reluctant to adjust their interest
rates...to stabilize the euro-dollar rate and to maintain stability and
confidence on the financial and currency markets.... The only alternative to action, as regards
both rates and some form of concerted intervention on the exchange markets which
was apparently too hard to agree on, chiefly for political reasons, was to
attempt to influence the markets via a propaganda exercise, reiterating
confidence in a process of orderly adjustment of the current basic deficits.... Lastly, a glimpse could be given of the
possibility of direct intervention on exchange rates should it prove necessary,
in the hope that all this could be done in the right ways and without a
repetition of the Dubai fiasco. The
likelihood of doing anything (more) useful was and remains low. Trotting out facts and intentions makes a
limited impact on the markets, especially if the former are common knowledge
and the words uttered about the intentions disguise the disagreement, not the
agreement among those uttering them.
They must be followed by action, embarked upon in good time and with
credible tools suited to the purpose.
The former always come cheaper than the latter, but they are also far
less useful, and the same applies to the communiques issued by the ministers of
the seven major countries."
"The G-7’s Message To Market Test"
Stefano Trincia noted in Rome's center-left Il Messaggero
(2/9): “The Boca Raton compromise is
heading for its most important verification, the market one. The prospects, in light of what emerged at
the conclusion of the G-7 summit, do not seem to indicate a substantive change
in course in the exchange rate between the mini-dollar and the super euro. Despite the fact that the summit’s final
document explicitly cited the risk of an 'excessive volatility’ and of a
'disordered movement' in the purchase of the currencies...investors and
speculators could decide today to ignore the warning on the re-opening of
negotiations and to continue to aim at the weakening dollar by causing a
further decrease in its value.”
"U.S., The Eternal Locomotive With Fewer Gears"
Eugenio Occorsio opined in left-leaning, influential La
Repubblica (2/9): “As is assured in
all the economic circles of the planet, 2004 should be the first year in a new
growth era. But in truth, at the first
G-7 summit of the year, in Florida, there was not much room for reciprocal
reassurances: the currency tensions are
too high, the gap relative to the growth rates are still too wide.... Of the three areas in the world, the U.S.
heads the positive economic trend, where the domestic situation is becoming
stronger. This weekend the president of
the Federal Reserve, Alan Greenspan and Treasury Secretary John Snow faced a
diplomatic offensive on the part of the allies who were asking for a slow down
in the dollar’s decline.... Economists
agree that things are looking brighter.
Does this mean that it will be plain sailing? Certainly not.... Among the most worrying factors is the budget
bill 2004 announced by President Bush.”
RUSSIA: "Big Seven
Have Released Euro And Dollar Into Free-Float"
Natalya Orlova and Alexei Tikhonov commented in reformist Izvestia
(2/9): "Finance ministers of
leading economic powers attempted to solve the fate of the dollar and the
euro. G-7 countries tried to force the
U.S. to watch over the rapidly falling rate of the dollar. As a result the leaders agreed that the
correlation of the rates of the currencies (the dollar, the euro and the
Japanese yen) will reflect real market indicators. In reality this means that the rate of the
principal world currencies will still remain difficult to control.... It is not worthwhile to exaggerate the
likelihood and the market force of (any) interaction. The problem lies in the fundamental
differences of major economic blocs in the world, which previously were ironed
out because of a more global East-West confrontation. In reality, however, the future of the dollar
and the euro will depend on the situation of the U.S. budget and the progress
in economic restructuring in Old Europe."
"Alexei Kudrin Was Repaying Debts In Florida"
Pyotr Netreba and analyst Sergei Minayev said in reformist
business-oriented Kommersant (2/9):
"Thus, unlike the meeting in Dubai, the G-7 meeting in Florida
ended in a situation when, despite all the foreign economic problems of the
United States the dollar vis-a-vis the euro is not expected to lower any
more--Europe will not countenance this."
AUSTRIA: "The World Of
Miriam Koch held in centrist Die Presse (2/9): “This weekend, the Finance Ministers and
currency guardians of the seven largest industrial nations met in Florida, and
yesterday announced the result of their deliberations: a joint warning of
excess volatility on the currency markets.
So what does that mean? That the
euro is going to stop its rise?....
Well, the fact that this formulation was included in the final statement
of the meeting will at least bring about a short pause on the currency markets. In the medium term, however, nothing is going
to change about the weak dollar and the strong euro. Despite their unanimous words, the conflicts
of interest among the seven giants mean that they are really a long way away
from taking joint action to stabilize the exchange rates.”
Influential independent NRC Handelsblad editorialized
(2/11): "Who will pay the bill for
America's overspending? That was the
most important question at the G-7 meeting in Boca Raton, Florida. The finance ministers and central bankers of
the seven largest industrialized countries could not come up with an answer to
this question.... No wonder. First of all, the American government hardly
has the need to take any measures until the presidential elections and
secondly, important countries [such as China] were not represented at the
meeting.... Budget deficits stimulate
economic growth and that is good. But
deficits covered by foreign creditors will sooner or later reach a critical limit--even
when it concerns the U.S."
Dollar Serves Turkey's Interests As Well"
Gungor Uras observed in mass-appeal Milliyet (Internet
version, 2/9): "It has become clear
once again that economic growth is the priority of the United States at least
until the presidential elections.... For
this reason, the United States does not want to stop the depreciation of the
dollar.... The latest G-7 summit was a
'meeting of weeping' for the European G-7 members. The European countries are complaining
against the depreciation of the dollar, because...the prices of European
products...are (relatively) rising as a result of the depreciation of the
dollar. While U.S. firms are selling
their products abroad, the European firms are finding it difficult to export
their products.... Presently countries
other than the United States are unable to stabilize the prices of their own
currencies by purchasing and selling dollars from the markets.... European countries whose currencies
appreciated against the dollar...hope that the United States would once again
render the dollar attractive by raising the interest rates on the
dollar.... The United States, on the
other hand, is pleased with the situation, because the depreciation of the
dollar does not harm the economic situation of the U.S. ... Lower interest rates are granting new
employment opportunities [and]...increasing the amount of investments and
production; securing economic growth; paving the way ahead of more exports;
preventing the flow into the country of foreign products, which have become
more expensive...and is weakening the financial structure of rival countries
and foreign export firms.... We may
deduce from all these developments that the U.S. administration is not
considering (for the time being) taking any action for appreciating the dollar
or raising the interest rates....
Turkish exporters initially complained against the cheaper dollar
rates. However, these exporters are not
making any noise now, because the dollar rates are stable against the [Turkish]
lira.... Moreover, most of the Turkish
exports are now being made in euros."
EAST ASIA AND PACIFIC
CHINA: "Time For Plain
Talk On Trade"
Zhu Qiwen commented in the official English-language newspaper China
Daily (2/3): “The United States is
apparently determined to insist that China has not adequately fulfilled its
commitments to the World Trade Organization (WTO), even though it has become
the world's fourth largest trading power thanks to robust growth over the past
year. Meanwhile, a recent Chinese report
on U.S. trade policy indicates the world's largest economic power has failed to
practice what it preaches about free trade.
For a developing country like China, a total annual foreign trade
volume...(of) about 60 per cent of its gross domestic product...offers ample
testimony to the nation's commitment to opening up. Despite that, the office of United States
Trade Representative criticized China's WTO compliance in its annual report to
the U.S. Congress in December....
However, in light of China increasing access to its fragile banking
sector for foreign competitors and voluntarily slashing export tax rebates in
2003, the U.S. criticism is unfounded....
Meanwhile, a report released by China's Ministry of Commerce last month
indicated that rising protectionism in the United States has become a serious
cause for concern, especially regarding trade relations between the two
“As a major player in global trade, the United States has made
significant contributions to international trade rules and garnered many
benefits from those rules. Nevertheless,
to revive the American economy, the U.S. administration has adopted more and
more protective measures in recent years.
This has sent out mixed signals over its commitment to the WTO free
trade agenda.... In a sense, such
protective practices have severely undermined international momentum and
confidence to promote the WTO's efforts to give developing nations a larger
share of trade benefits. ... Though
China agreed the United States can maintain its anti-dumping measure for 15
years after China's admittance to the WTO, the remarkable development of
China's market economy is an undeniable fact.... The two reports have shed some new light on
each country's trade policies, but it is important to ensure they are properly
interpreted in order to enhance mutual understanding of the importance of this
CHINA (HONG KONG SAR):
"G-7 Must Put Its Own Finances In Order"
The independent English-language South China Morning Post
editorialized (2/9): "In Dubai, the
U.S., facing growing trade deficits, was calling for redress through exchange
rate adjustments. Amid the latest group
gathering, the American economy is growing again and the Bush administration,
running for re-election, is happy to see continued weakness in the dollar as
this boosts exports. This time, it is
the Europeans, with a currency that has risen 30 percent against the U.S.
dollar over two years and whose goods are now more expensive in both America
and Asia, who are seeking relief. They
point to a ballooning U.S. budget deficit that is exacerbating the imbalances,
but little is likely to happen on that front for the next year.... What does all this mean for the mainland and
the rest of Asia? For one thing, there
could be renewed calls for Asian currencies to rise, this time to ease the
pressure on European economies. As has
been widely expected, the statement about currency flexibility was repeated,
and will likely be seen as encouragement for Asian countries to let their
currencies trade more freely against the U.S. dollar.... In the meantime, the best course for G-7
countries would be to put their own fiscal houses in order."
"G-7 Issues Veiled Call for Yuan Adjustment"
Andrew K. Collier wrote from Beijing in the independent
English-language South China Morning Post (2/9): "The G-7 grouping of rich
countries...made a fresh if thinly veiled appeal for a yuan revaluation after a
mainland business newspaper said the currency could be revalued as soon as next
month.... After a two-day meeting...the
G-7 adopted a communique saying 'more flexibility in exchange rates is
desirable for major countries or economic areas that lack such
flexibility.'... There was little
doubting that the statement targeted Asian countries.... The mainland anchors the yuan near a rate of
8.28 to the U.S. dollar. Other countries
in the region, including Japan, have been aggressively intervening in foreign
exchange markets to slow the rise of their currencies against the U.S. dollar
to maintain the competitiveness of their exports.... The G-7 communique adds to the growing
pressure on Beijing to revalue the yuan at a higher level against the
"Resourceful China Missing From G-7
Graig Stephen maintained in the independent English-language South
China Morning Post (2/7): "This
weekend's G-7 meeting in Boca Raton, Florida, again sees finance ministers of
the leading industrialized nations gather to dissect the increasingly
imbalanced-looking global economy and dysfunctional currency markets. While the Bush administration publicly
vacillates over whether it has a flexible or strong dollar policy, the trend so
far has been unequivocally down. The
question is whether its decline can continue to be managed down without major
dislocation to the world economy....
China, so inextricably connected with its dollar peg and bilateral trade
with the U.S., is absent. After all, if
China was guilty as charged with exporting deflation, could it not also be a
future exporter of inflation? China's
contentious currency peg to the greenback has meant that not just its exchange
rate, but also its monetary policy is abdicated to the U.S. Federal Reserve--an
agreeable state of affairs that led corporate America to outsource
manufacturing en masse.... Inevitably,
analysts and traders will dissect and second guess the G-7 communiqué after the
meeting in Florida. But perhaps it is
not these central bankers one should be paying attention to, but the ones at
the People's Bank of China. If China can
export deflation, drive up commodity prices and mop up excess U.S. government
debt, perhaps it can also drive up inflation or even interest rates? Maybe not today, but sometime soon."
Should Be Taken To Prevent The Dollar's Fall"
The top-circulation, moderate Yomiuri editorialized
(2/10): "A joint statement issued
by G-7 finance ministers...appears to be helping by temporarily halting
speculators' dollar-selling offensive, but not particularly effective in
reducing market pressures for U.S. dollar depreciation. The dollar's continuing fall against the yen
and euro, if prolonged, will hit export-oriented Japanese businesses hard,
dealing a new serious blow to the emerging recovery of the Japanese
economy. A delay in the recovery of
Japanese and European economies will eventually have a negative effect on the
U.S. economy and limit Japan's future market intervention to stop the dollar's
slide. The GOJ should work with the U.S.
and Europe to prevent the dollar's further fall. If exchange rates are not stable, steady world
economic growth cannot be achieved."
"Risky Mutual Monetary Dependence Must
The liberal Asahi editorialized
(2/10): "Finance ministers and
central bank governors of the Group of Seven (G-7) industrial nations
gathered...amid mounting international tension over the dollar's continued
freefall. The leaders issued a joint
statement, a document that appears to be a political compromise.... Market players find nothing in the communique
that suggests any significant change in Washington's policy of allowing the
dollar to trend downward gradually. Most
investors are betting on a continued weakening of the U.S. currency in coming
months. Obviously, the top G-7 economic
policymakers failed to dispel fears about a possible crash stemming from the
towering U.S. twin deficits: budget and
current accounts. They have merely put
off wrestling with the problem in earnest....
Meanwhile, complaints have grown louder and more intense in Europe,
which is bearing the brunt of the effects of a weaker dollar. There is also a limit to Japan's ability to
support the dollar with heavy intervention.
Japan and other countries in Asia that have a large trade surplus with
the United States are, in effect, financing the U.S. budget deficit by buying T
bills. But this can be seen as unhealthy
mutual dependence. It is doubtful
whether this risky arrangement can go on for long. In this sense, the G-7 statement's comment
that 'sound fiscal policies over the medium term are key to addressing global
current account imbalances' is a mild warning about the U.S. twin
deficits.... Japan must make more
efforts to engineer an economic recovery driven by domestic demand so that its
economy can grow without depending on exports. At the same time, the United
States should also make serious efforts to trim its fiscal deficit for the sake
of stability in the world economy."
"Fall Of U.S. Dollar"
Business-oriented Nihon Keizai declared (2/6): "Although the world economy is making a
steady recovery, there are concerns over fluctuations on exchange
markets.... Japan, which is showing
signs of economic recovery due to a steady rise in exports, is engaged in
massive market intervention to stop the yen's rapid appreciation. The weakness in the U.S. dollar stems from
global concern over U.S. account and budget deficits. The Bush administration has announced a goal
to halve the U.S. budget deficit in five years.
It is imperative that the USG take concrete action to reduce the deficit
and regain global confidence."
SINGAPORE: "The Money-Go-Round"
The pro-government Straits Times editorialized (2/11): "Exporters in Asia should have known
better than to look for clear leads from the Group of Seven (G-7) finance
ministers' meeting.... Market watchers
would have known after the last G-7 meeting in Dubai that the grouping would do
little to halt the U.S. dollar's fall and, instead, place the burden on China
to do its part in exchange rate 'flexibility'.
Election politics in the United States was the unseen hand. But China's imports account for only 1 per
cent of world output! That Dubai meeting
was in September. In the months since,
the linkage between the U.S. dollar's purchasing power and the fortunes of the
incumbent president in election year has become rather like policy, although it
would never be acknowledged. For
President George W. Bush, the strongest argument he can mount against the
surging Democrat challenger John Kerry is in the area of jobs. Cheapening the dollar helps exports and keeps
the factories at full tilt. That would
keep workers happy. U.S. Treasury
Secretary John Snow all but signaled at the G7 meeting he was content to let
the dollar keep sliding.... This is
where the G-7, in the Florida session at least, has failed to address
fundamental imbalances endangering the stability of the global system. Thanks to the cheaper dollar the U.S. is
growing at about 4 per cent.... But
Europe's growth is at risk. Japan's
recovery can be switched off if its leaders cave in to pressure over the
yen. China is going great guns at about
9 per cent but, as noted, its share of world trade is smaller than
imagined. The G-7 ministers indeed can
support their contention that global recovery has strengthened. How they would 'cooperate as appropriate' and
monitor the rates for long-term stability is the question to ask."
SOUTH AND CENTRAL ASIA
INDIA: "Why The Dollar
Chennai-based financial daily Business Line remarked
(2/11): "The declining fortunes of
the dollar is becoming a global concern.
The U.S. is earning less from exports than it needs to pay for her
imports. The U.S. trade- and
budget-deficits are increasing. The
dollar has been falling while the euro, the yen and the rupee are rising. There is a possibility that this may lead to
dumping of dollars in a big way and bring the U.S. economy down. Many developing countries are dependent on
the U.S. market. The U.S. economy will
pull down these countries along with it.
Thus, it is being said that the whole world, in its own self-interest,
should rescue the dollar by continuing to buy it .... The U.S. is like a buyer asking for more
supplies against a check which should not be presented for payment. It will obviously be better to sell the goods
to another buyer at lower price but whose check is good. But, then, if the businessman stops selling
to the dubious buyer and does not find another buyer then he is in
trouble. It follows that the rest of the
world should develop other markets instead of continuing to buy U.S. T-Bills of
dubious value and exporting to the U.S.
The problem is that other countries do not have an America-like appetite
of making huge borrowings to import and consume goods from across the
world.... The real concern is that U.S.
hegemony will be broken with the fall of the dollar. Thus, a false propaganda is being made that
it is necessary for the rest of the world to buy dollars for stability and
growth. The truth is that the collapse
of the dollar and the U.S. economy can lead to better standards of life for our
people and also create a multipolar world."
"Back To Table"
The Deccan Herald commented (2/9): "There seems to be a welcome willingness
to resume the stalled WTO negotiations.
The growing realization among important countries of the need to resume the
World Trade Organization (WTO) talks, that collapsed in Cancun last year, is a healthy
development.... The Cancun talks
collapsed as the draft resolution did not reflect the concerns of many
developing and least developed countries.
Now the challenge is how to arrive at a consensus. There are indications of the willingness, of
the parties concerned, to negotiate....
Many countries feel that there is an urgent need to move ahead with
negotiation in services and non-agricultural market access.... Since success is dependent on the principle
of give and take, developed and developing countries must strive to put in
place a new global trade regime that will accommodate the legitimate concerns
and aspirations of all countries.
Considering the complexities of the issues involved, it is a difficult
task. The challenge lies in trying to evolve
a system, which should appear to be fair and reasonable as far as
CANADA: "It's Time To
Admit China To The Club"
The business-oriented Financial Post opined (2/9): "As Group of Seven finance ministers
emerge from two days of talks in Florida on Saturday to try to prevent the
slide in the U.S. dollar from turning into a full-blown currency rout, it is
hard not to get the feeling this exclusive club of the world's richest
countries is heading into its twilight years."
ARGENTINA: "A Fearful
Claudio Mario Aliscioni, leading Clarin
economic columnist, wrote (2/3):
"When George W. Bush took office...he had a huge fiscal surplus at
his disposal.... A red light quickly
appeared in budget figures thanks to a controversial tax reduction that
benefited the rich, mostly. Shortly ago,
the IMF warned the White House that it must cut back the fiscal as well as the
trade deficit. This is a sensible
concern. The U.S. is financing its
deficit via foreign capital. For the
time being, no one dares to imagine the possible consequences if this capital
decides to withdraw."