Monday, November 8, 2010

Geithner backs away from current account proposal

Last month Treasury secretary Geithner proposed the idea that there would be current account imbalance targets. Instead of pushing for changes in the exchange rate, there would be a push to reduce the current account imbalance. Deficit countries would try and move to current account balance and surplus countries would try and reduce the size of their trade imbalance. Before the G20 meetings this week-end, Geithner has backed away from pushing the target approach. Clearly, he has not had any takers for his idea imbalances should not exceed 4 percent of GDP.

The drop-back in the position is a result of more push-back n US monetary policy. The US is not thought of as a financial leader. "With all respect, US (monetary) policy is clueless," said Wolfgang Schauble, German finance minister.

Others do not believe the US is clueless, but has fallen into being a a currency manipulator through the dollar decline. The US is extending the currency wars through their excessive monetary actions.

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