October 13th, 2010
04:13 AM GMT
(CNN) – Brazilian Finance Minister Guido Mantega said the words that launched a thousand headlines last month, uttering the phrase that now defines the latest phase in the post-financial crisis world:
“We’re in the midst of an international currency war.”
He had said out loud what was murmured across economies worldwide, as Japan jumped to intervene against its rising currency and the chorus of complaints against the value of China’s yuan grew to a roar. Other economies, such as Taiwan, South Korea and Thailand, also have taken moves to influence the value of their currencies.
Speaking to CNN’s Maggie Lake, Mantega said he is hoping an international accord could mitigate the growing currency exchange rate rancor.
“I don’t think the United States the Europeans have their hands tied, I think they can do something more with fiscal policy,” Mantega said, to avert protectionism – of which the current currency interventions are a symptom. “Beggar thy neighbor is not a good policy.”
Mantega hopes that the Group of 20 summit in Seoul in November can map out “the beginning of an accord” on global currencies, much like the 1985 Plaza Accord – when the U.S., Japan, France, the U.K. and West Germany agreed to jointly intervene in the global currency markets to push the U.S. dollar down against the Deutsch Mark and Japanese yen.
This may be a bitter pill to swallow for Beijing. Some point to the Plaza Accord – which doubled the value of the yen in 30 months – as a needle that eventually pricked Japan’s economic bubble. It also raises a question raised by Prof. Chak Wong on World Business Today: Would a currency agreement alleviate global trade imbalances?
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