Monday, February 25, 2013

The competitive devaluations damage world economic recovery

Since early 2012, repeated and spread of the debt crisis seriously affected the euro-zone economy, need strong impact on other economies outside the global economic slowdown. The face of the grim situation, in order to stimulate economic growth, starting from the third quarter of 2012, the United States, European Union, Japan and other major developed countries have taken prices easing and quantitative easing monetary policy to increase the money supply to the market, trying through devaluation to stimulate the economy, but the result of competitive currency devaluation has not changed much in the country's economic growth of the developed economies, the unemployment rate has not decline. Strong spillover effects of monetary policy in developed countries, the proliferation of competitive devaluations caused liquidity, on the one hand to push up the international market commodity prices, on the other hand by the outflow of capital into emerging market economies, giving rise to the emerging markets the countries with economies in asset prices turns up and facing the heavy imported inflation pressure, a serious impediment to the healthy growth of the national economy of the emerging economies, which have a negative impact on global economic recovery.

German "Frankfurter Allgemeine Zeitung" on the 18th of this month, the German Central Bank President Weidmann was quoted as saying that monetary policy is not a panacea to solve all the problems, the competitive devaluations are no winners. Indeed, from the effect of exchange rate changes, competitive devaluations, and direct intervention in the foreign exchange rates, currency devaluation effects section will cancel each other out, the effect of stimulating exports is limited, the negative impact if implemented in all countries, easily lead The country's foreign exchange reserves and the money supply has increased substantially, rising asset price bubbles and the potential inflationary pressures. Therefore, the competitive devaluations are not able to promote the recovery of the global economy, but the world is awash with liquidity, asset price bubbles, the potential of increasing inflationary pressures, the foreign exchange market is more volatile.

Although developed countries with economies in the long term, frequent introduction of competitive devaluations is drinking poison to quench thirst, unsustainable, but the vast number of developing countries, especially the emerging economies, competitive currency devaluation caused harm can not be taken lightly.

The world has entered the era of competition for survival "financialization" multipolarity change with national survival trend of increasing competitive pressure, the financial monetary means to become more and more developed countries to shift the crisis in the world economy, to stimulate the economy growth, safeguarding the economic and financial hegemony normalized financial means of competition for survival, these means including quantitative easing, the manipulation of exchange rates and interest rates, competitive devaluations, debt monetization of monetary policy measures. It can be expected that once the devaluation of the currency of the United States, Japan and the euro-zone countries from the independent behavior becomes a universal phenomenon, the entire world monetary system will be linked to the shock, and accompanied by increased uncertainty in developing countries, including China, will pay excessive self-interest monetary policy for the United States, Japan and Europe.

On the 16th of this month, finance ministers and central bank governors of the Group of Twenty (G20) in Moscow issued a joint communique to "resolutely resist the competitive devaluations to oppose all forms of protectionism". Obviously, the participating parties have recognized the dangers of competitive devaluations, but if the world's major economies can not be taken consistent action and specific measures to resolutely resist the competitive devaluations communique statement will only be empty talk

Difficulties and problems facing the world's long-term economic recession, the world should strengthen the coordination of macroeconomic policies, to take resolute and effective concerted action, and resolutely resist all kinds of excessive self-interest of competitive currency devaluation, countries should focus on domestic consumption and investment The increase, to take effective measures to stimulate the economy, to contribute to the recovery of the global economy.

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