Tags: Greenspan | US | Dollar | Low

Greenspan: US Intentionally Keeping Dollar Low, Hurting Others

Thursday, 11 Nov 2010 07:03 AM

Alan Greenspan, former chairman of the Federal Reserve, said Group of 20 leaders should act to foster growth in global trade by agreeing to limit foreign- exchange reserves and avoid capital-flow restrictions.

China’s accumulation of more than $2 trillion in reserves as it limits the yuan’s gains and the U.S.’s pursuit of a weaker dollar risk an increase in protectionism that would exacerbate a recent slowdown in global trade, Greenspan wrote in a column published by the Financial Times dated yesterday. The G-20 should set up rules through the International Monetary Fund that would govern reserves and capital inflows, he wrote.

“We should discourage reserve accumulation whose sole purpose is to suppress exchange rates for competitive export advantage,” Greenspan wrote. “If the G-20 is serious in pledging to sustain open multilateral trade and the international financial system that fosters it, it should be willing to forgo an element of sovereignty to achieve net gains for all.”

The ratio of global exports to gross domestic product recovered following the financial crisis then slowed again in the third quarter, Greenspan said. Protectionism would accelerate that slump, he said.

Leaders of the Group of 20 nations meeting in Seoul should focus on action to promote “unfettered” global trade, he said.

“China has become a major global economic force in recent years,” Greenspan said. “But it has not yet chosen to take on the shared global obligations that its economic status requires.”

Reserve Currency

President Barack Obama has found himself on the defensive as world leaders gather in Seoul, with G-20 members disparaging U.S. economic policies they say weaken the dollar and stoke hot- money flows.

The Federal Reserve’s decision last week to pump $600 billion into world’s biggest economy has stolen the spotlight away from China’s attempts to hold down its currency. Brazilian Finance Minister Guido Mantega said yesterday that the Fed’s move may inflate commodities prices and proposed the world move away from using the dollar as the main reserve currency. Former Chinese central bank governor Dai Xianglong this week faulted the U.S. for adopting policies without regard for the dollar’s global role.

China, the world’s biggest holder of foreign exchange, this week raised bank reserve requirements as a means to stem capital inflows that threaten to drive up stock and property prices. South Korea may revive a 14 percent tax on domestic Treasury and central bank bonds held by foreigners as early as January to curb foreign-exchange volatility, a ruling party lawmaker said this week.

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Alan Greenspan, former chairman of the Federal Reserve, said Group of 20 leaders should act to foster growth in global trade by agreeing to limit foreign- exchange reserves and avoid capital-flow restrictions.China s accumulation of more than $2 trillion in reserves as it...
Greenspan,US,Dollar,Low
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2010-03-11
 

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