The IMF, led currently by Managing Dorector Dominique Strauss-Khan (DSK), has spearheaded the effort to resolve the ongoing "currency wars," as I call them. (See my prior posts: China - US Currency conflict escalates... former adviser to the PBoC says US Dollar "One Step Closer" to a Crisis , Currency War On! The first finance official to state the obvious: "a trade war and an exchange rate war" , Who "Wins" a Currency War? , and Dominique Strauss-Khan and the "Unlikely" Currency War He Feels the Need to Prevent .
Well, this weekend's IMF meeting is over and what has transpired?
From the Wall Street Journal, emphasis mine:
IMF Fails to Resolve Conflict Over Currencies
WASHINGTON— The International Monetary Fund's annual meeting this weekend failed to ease currency battles roiling markets, pushing the dispute off to a summit next month of leaders of Group of 20 countries, with no clear resolution in sight.But there's more:
The meeting Saturday might have been more significant for possible solutions ruled out. Chinese central bank officials rejected calls for an international or regional currency accord, and the World Trade Organization's chief said his institution didn't want to get involved in exchange-rate fights.
IMF members also scotched an effort by the U.S. to link a bigger Chinese role in the IMF to changes in Beijing's currency policies. "Nobody is linking this," said Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the IMF's policy-making committee.Amd China's Central Bank governor sounded rather confident:
China's central bank governor, Zhou Xiaochuan, said he figures U.S. and European pressure will diminish once unemployment there begins to decline. He also dismissed the possibility, suggested by some Chinese academics, that Beijing should offer to limit exports to the U.S temporarily as a way to defuse tensions, in the same way that Japan limited exports of automobiles to the U.S. in the 1980s.And as for the issue of EU "over-representation:"
"That's an opinion of a small group of economists," Mr. Zhou said. "It's not seriously considered."
The IMF meeting did produce progress in continuing efforts to reorganize how the institution is governed. Mr. Boutros-Ghali said he expects a deal by the G-20 summit in which Europe will, in effect, cede two of its eight seats on the IMF's 24-member executive committee.And it looks like Belgium has made a sacrifice:
For instance, Belgium represents a constituency that includes Turkey, which has come to have a more significant role in global economy than Belgium now has. "They'll rotate seats," Mr. Boutros-Ghali said. The board members " won't have a European face" as frequently as before.Misthos here. I'm not at all surprised that the issue of currency manipulation by all major economies was not addressed or eased by the IMF. The IMF has no real teeth when it comes to such matters. It barks, and it advises the G20 - where the real power lies. But even the G20 needs cooperation and coordination to be relevant. And don't get me wrong, I support such forums for international dispute resolution. The alternative is a world that falls all too easily into conflict. But nonetheless, I remain negative in my forecast.
We will see what transpires this November in South Korea when the G20 meets.