Emerging economies criticize US for enforcing international monetary solution for solving its domestic challenges instead of implementing difficult fiscal measures to bring unemployment down and manage deficit.
After failing to devise and implement a viable strategy to deal with its domestic issues of high unemployment and a huge deficit USA is bringing the whole world down with it.
Jeremy Warner, assistant editor of The Daily Telegraph wrote, “The U.S. has no strategy for the jobless and no strategy for rolling back debt. Little wonder that a renewed sense of gloom has settled on the international policy makers”.
Brazil’s Finance Minister Guido Mantega referring to the continually dropping US dollar against the Thai baht, the Malaysian ringgit, the Singapore dollar, and the Indonesian rupiah since mid-September said, “We are in the midst of an international currency war … Advanced countries are seeking to devalue their currencies”.
The US currency domination has resulted in almost all countries keeping their foreign exchange reserve in US dollars, and the dwindling value of dollars is generating fears among those countries of being filled with cheap dollars.
A Shanghai based economist recently said that the appreciation of Chinese yuan will decrease US debt to China and this will result in shrinking Chinese forex reserve of US $2.65 trillion.
US monetary policy for a weaker dollar for its economic interest and for domestic political gains is pushing the export-dependent emerging and developing economies to take reactionary measures to protect themselves.
The Japanese yen climbed to record high against US dollar on Friday in New York market. Japan publicly intruded in the forex market after 2004.
Brazil’s central bank has implemented monetary measures to limit increase in its exchange rate. Thai government may also intervene publicly to protect its interest in the volatile forex market.
Dominique Strauss-Kahn, chief of International Monetary Fund (IMF), raising alarm against using currency as a ‘policy weapon’ said, “Currency war might be too strong, but the fact the countries want to find domestic solutions to a global problem is really a threat to the recovery”.
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