The Quest for Global Balance

Even with all the chaos in the US economy these days, the G20 summit approaching this weekend is bringing the global financial system to the top of the agenda, at least for the few days. One of the issues of the past few weeks has been volatility in currency prices as (most) countries with overvalued currencies and large current account deficits see their currencies fall. The flip side of this situation is countries with undervalued currencies and large current surpluses – most notably, China. Arvind Subramanian presents one solution in the Financial Times: treat undervalued currencies as a form of trade barrier and manage them through the WTO.

One response to “The Quest for Global Balance

  1. I don’t see China being the least tempted to agree to such an arrangement. The inducements Arvind mentioned are laughably inadequate. The second point, voting share in the IMF, is probably regarded by the Chinese as something they should have anyway, and not part of some quid pro quo.

    In any case, there are sociopolitical reasons for having large current surpluses. Attempts to discourage it at this time will be a waste of effort.