"Currency war" is heating up, and all parties share their hopes for the G20 Summit in South Korea. However, it is reason to believe that the meeting would be able to achieve anything in this respect, and the continuation of the cycle "Beggar-thy neighbour".
There have been few developments since my last analysis currency war.Above all, more central banks (and hence more currencies) now suffer. last week Argentina, pledged to continue its activities in 2011, Taiwan, and India – among other less well-known countries – hinted to the inevitable participation.
More important is the official extension of FED quantitative easing program (QE2) at $ 600 billion, will dwarf all other central banks, in fact it is somewhat ironic that the Fed is the only Central Bank sees its monetary easing in the form of currency intervention, when you consider its impact on the dollar and its (random?) role in "activates the Currency of war." according to Chinese officials, "continued and substantial depreciation of the dollar has recently led countries including Japan, South Korea and Thailand to intervene in the currency market," while the Japanese Prime Minister recently accused the United States "the weak dollar policy."
At the moment there is no indication that other developed countries will follow suit, while taking into account the concerns the QE2 "at the end of the day can moisture recovery in the euro zone," I think it is too early to exclude anything. Although the Bank of Japan similarly stayed with market after its massive interference in October, the Minister of finance Noda Jo?ihiko recently stated that "I think [Ian] moves yesterday were a bit one-sided. I will continue to follow closely these developments with interest."
When the war reaches a culmination of sorts each baited breath waiting to see what would come to G20. Unfortunately the G20 has achieved nothing in last month's meeting of Finance Ministers and Central Bank Governors, and there is little reason to believe that in this month's meeting will be any different.
The G20 is not a regulatory body as the WTO and IMF, and it doesn't have built-in power stop participating countries to devalue its currency.Conference host South Korea wrongly noted that while ' there is no legal obligation "discussion of the G20 will bring" peer impact on these countries ' that violate the deal. "Not to mention that the G20 will not affect the weak dollar or undervalued Yuan, both of which are at the root of the currency of war.
It's really just wishful thinking that come to their senses and realize that devaluation of the currency is doomed to failure.In the end, the only thing that will stop them from interference is to take the futility of his: "history of capital controls is that they don't work in the management of foreign currencies".This time will be no different, "especially with banks, said offering products to get around new taxes."The only exception is China, which can prevent Yuan of strict controls to address capital inflows.
In short, "the wall" that pouring in emerging economies is a force that is too large to match individual central banks return proposed investments in emerging markets, (even ignoring currency), so much more than in industrialized countries that investors will not deter and will only work harder to find ways around them ironically insofar as controls limit the supply of capital and the impact they are likely to stimulate additional capital inflows. more successful they are, the more they will fail and that no new currency agreement cannot change.
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