Times have changed
The share of GDP accounted for by the G-7 countries continues to decline. Thus these summits are more limited in their value, according to the Lex column in the FT:
At the peak – the Plaza accord of 1985 – a G5 gathering led to a co-ordinated $18bn foreign exchange intervention that was followed by the desired decline in the dollar. Now, as G7 finance ministers and central bankers meet in Washington, the idea that the event may have market-moving clout is regarded as laughably unrealistic…
When it comes to altering fixed exchange rates, in particular the renminbi, the G7 has a hopeless track record. This is despite some pretty unambiguous statements aimed at Beijing. In February, the G7 finance ministers said it was desirable that exchange rates moved, especially that of China. This time round, the Bank of China, unawed, has bothered only to send its deputy governor to observe.
China has about $1.4 trillion in foreign exchange reserves at present and has done next to nothing so far in recycling them, despite having put structures in place to do so. Jawboning China on the value of the yuan, or even admitting China to a new G-9 is far less important than getting moving on this critical recycling of importer nations’ current account deficits.
October 21st, 2007 at 3:53 pm
Look, China is recycling their dollars into Hillary’s campaign as fast as possible. They only have so many immigrants in the U.S. to use. Give ‘em time.