A Watched Pot Never Boils; Look Abroad Instead
The US financial crisis is relevant, but other economies are boiling over.
The G-7 meeting has concluded and the only accomplishment was yapping about the need for a strong dollar. Consider G-7 Finance Chiefs Campaign for "Strong Dollar".
Finance chiefs headed for Group of Seven talks in Istanbul pushing for a "strong dollar" amid concern its slide will impede their recoveries from the worst global recession since World War II.
"Everyone needs a strong dollar," French Finance Minister Christine Lagarde told reporters in Gothenburg, Sweden on October 2. "We'll have a chance to discuss this in the coming days."
Her comments came four days after similar remarks from European Central Bank President Jean-Claude Trichet. Treasury Secretary Timothy Geithner ... also pledged support for a "strong" currency.
"Market-moving announcements could be forthcoming," said Geoffrey Yu, a foreign-exchange strategist at UBS AG in London. "We expect to hear renewed commitments to the US strong dollar policy and the European delegation may be tempted to communicate their worries on further rises in the euro."
Canadian Finance Minister Jim Flaherty ... pushed China to let its yuan appreciate "more quickly" after keeping it little changed against the dollar for more than a year.
G-7 Wimps Out, Avoids Formal Dollar Criticism
Those hoping to see a firm stand by the G-7 regarding currencies may be hoping for another 20 years.
As expected, the G-7 avoids dollar criticism, warns against currency volatility:
Group of Seven finance chiefs stopped short of singling out the weaker dollar for criticism and stuck to their mantra that "disorderly" swings in currencies threaten economic growth.
"Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," G-7 ministers and central bankers said in a statement after talks October 3 in Istanbul. Officials welcomed China's "continued commitment" to a more flexible currency, which they said would promote balanced global growth. The statement repeated language used at the last G-7 in April.
"Following the escalated rhetoric, investors may have been braced for some escalation in language," said Sophia Drossos, co-head for global foreign exchange strategy at Morgan Stanley in New York. "Since we didn't get it, I look for the trend of dollar weakness to reassert itself."
G-7 Meritorious Statements
The German Deputy Finance Minister Joerg Asmussen said G-7 "statements will be published on merit." Please consider the following meritorious statements:
There's no room for complacency because the prospects for growth remain fragile and labor market conditions aren't yet improving.
We'll keep in place our support measures until recovery is assured.
We reaffirm our shared interest in a strong and stable international financial system.
Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.
We'll continue to promote the fundamental norms of propriety, integrity, and transparency, as agreed in the Lecce Framework and the Core Values of the Charter for Sustainable Economic Activity.
Is there any merit to throwing a party just to say that? If the G-7 can't agree on anything meaningful, how is the G-20 ever going to agree on anything?
For more on the complete uselessness of these summits, see The G-20 Summit Was a Rerun with an analysis of select entries from the historical record of a League of Nations 1930-31 Chronology.
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