The international monetary system is in chaos trying to establish order to avert currency war and trade protectionism. China with the highest growth rate and surplus and massive forex reserve has emerged as the new global financial super power and she is resisting pressure to assume its global financial responsibility.
Forex buyers are turning to gold as dollar’s fate is uncertain and Yuan is not freely available. American dollar is expected to drop as part of U.S. strategy of “Quantitative Easing” to enhance exports. U.S. manufacturers are asking to devalue dollar by 40% to make American products globally competitive.
Iran’s foreign exchange reserves have increased by billions of dollars because Iran imported tons of gold when the price of gold was $656 per ounce and now gold price has risen to $1,230 dollars per ounce.
World Bank president Robert Zoellick has suggested a gold standard in view of the uncertainty of the fate of currencies in the global financial market. Others foresee the ascendancy of two or three reserve currencies in the world besides dollars.
G20 summit in Seoul merely endorsed the agenda agreed upon in G20 ministerial meeting in Gyeongju to move toward a market determined exchange rate, to restrain from competitive devaluation of national currencies, to implement IMF reform, and to introduce guidelines on current account balance.
G20 head of states meeting failed to persuade China to accept the leading role as the global financial leader substituting United States. The global financial market is left without a captain as United States has relinquished its captaincy and China refuses to accept it.
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