Tags: trade | foreign | global | imbalance | slim | us | china

World's Richest Man: Currency War a Mistake

Sunday, 31 October 2010 07:20 PM

Billionaire Carlos Slim, the world’s richest man, said China must buy more and the U.S. needs to step up private investment to reduce the trade imbalance and boost their economies.

Global currency devaluation efforts will fail in the absence of economic policies that foster growth, said Slim, 70, in an interview in New York on Oct. 29.

“The best way to have a healthy fiscal environment is that investment should be done by the private sector,” Slim said. Currency devaluations “will not succeed in any way and they will pressure commodities,” he said.

Slim, the controlling shareholder of Mexico City-based America Movil SAB, Latin America’s largest wireless carrier, said the U.S. must rely on private industry rather than stimulus plans and China needs to increase domestic demand. Billionaires Warren Buffett and Bill Gates have supported President Barack Obama’s estimated $787 billion program to create jobs and infrastructure projects, while cautioning industry from becoming too dependent on federal spending.

Near zero interest rates in the U.S. make “most” private investment “profitable,” said Slim, whose net worth is estimated by Forbes at $53.5 billion. If interest rates are “10 percent, many investments are not feasible.” The U.S. overnight lending rate is in a range of zero to 0.25 percent, while in Mexico it’s 4.5 percent.

“In the U.S., you have a big problem with retirement and benefits,” said Slim. “The rate is now 18 percent of GDP, and going to 20 percent without financial services. You need to make all these corrections.”

Slim’s America Movil bought his Telmex Internacional SAB in a $23 billion transaction in June to add phone, Internet, and cable- and satellite-TV operations in Brazil, Colombia and other parts of the region. The company plans to combine Telmex’s regional fiber-optic networks with its own to offer faster mobile Internet speeds to customers.

The global financial crisis is a sign that governments must rein in debt, Slim said in comments to the George Washington University Global Forum in New York on Oct. 29. Fiscal and monetary policies are only “temporary medicine,” he said.

“You can only increase income, revenue, let down costs or sell assets.”

The U.S. Federal Reserve is considering a round of asset purchases after buying $1.7 trillion in debt from December 2008 to March.

Buffett, ranked the third-richest man by Forbes, said in a June 2009 Bloomberg Television interview that the U.S. may need a second economic stimulus package to combat rising unemployment. In his annual letter to investors issued in March 2009, Buffett also said “major industries have become dependent on federal assistance and they will be followed by cities and states bearing mind-boggling requests.”

Gates, the co-founder of Microsoft Corp., called Obama’s economic stimulus package “essential” in a December 2008 speech at George Washington University in Washington. “Spending is the only way to get out of this downturn,” Gates said.

Currency devaluation efforts with high commodities prices are a danger, said Slim. “If currencies go down and the commodities stay up, there will be a big problem for the population,” increasing food prices and sparking inflation, he said.

Finance chiefs from South Korea to South Africa signaled on Oct. 27 they may act to slow gains in their currencies, just four days after the Group of 20 vowed to soothe trade tensions in the $4 trillion-a-day foreign-exchange market.

Bank of Korea Governor Kim Choong Soo said on Oct. 27 that measures to mitigate capital flows could be “useful.” South African Finance Minister Pravin Gordhan said his government will use part of higher-than-expected tax revenue to build foreign reserves as it attempts to weaken the currency.

G-20 policy makers called for more sustainable current- account deficits without embracing a U.S. proposal for targets. G-20 representatives will meet again in Seoul on Nov. 11 and 12.

Obama and President Hu Jintao of China are scheduled to meet one-on-one Nov. 11 at the G20 summit amid strains over currency and trade. The Obama administration is under pressure from Congress to combat what the U.S. says is an undervalued yuan that gives Chinese exporters an advantage.

“In the new society you need competition, innovation, technology and flexibility and the private sector is who can manage that,” said Slim. “The government doesn’t have the flexibility.”

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Billionaire Carlos Slim, the world s richest man, said China must buy more and the U.S. needs to step up private investment to reduce the trade imbalance and boost their economies.Global currency devaluation efforts will fail in the absence of economic policies that foster...
Sunday, 31 October 2010 07:20 PM
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