Funny thing about Predators, however, is that they are always scheming to re-arrange the pecking order and the USA has been a big juicy target for a long time.
Before the G-20 meetings, the Germans were not about to let the USA argue that those countries with big trade surpluses are in some way cheating.
Merkel Prepares for G-20
'Our Export Success Shows How Competitive German Products Are'
Malte E. Kollenberg
In interviews given in the run-up to this week's G-20 summit in South Korea, Germany leaders, including Chancellor Angela Merkel, are defending their country's trade surpluses and warning against currency wars. Her words are unlikely to find a warm welcome in Washington.
On the eve of Thursday's G-20 summit in South Korea, German leaders haven't held back in their irritation with current United States economic and currency policies. In an interview with the conservative daily Die Welt published on Wednesday, Chancellor Angela Merkel defended her country's export surplus and warned against distortions in currency exchange rates.
"Current account balances are also proof of achievements, and they are the result of global market processes," Merkel told the paper. The German chancellor dismissed international criticism of the country's export surplus as well. "Our export success shows how competitive German products are," she said.
In an interview with SPIEGEL earlier this week, Merkel's finance minister, Wolfgang Schäuble, had even stronger words. "The German export successes are not the result of some sort of currency manipulation, but of the increased competitiveness of companies," Schäuble said. "The American growth model, on the other hand, is in deep crisis. The United States lived on borrowed money for too long, inflating its financial sector unnecessarily and neglecting its small and mid-sized industrial companies. There are many reasons for America's problems, but they don't include German export surpluses." moreAnd here we have the official USA posture going to Seoul. Are the Chinese "cheating" with their currencies? Will the currency disputes be papered over? Will trade barriers go up?
Specter of trade war looms as G-20 nations gather
By JEAN H. LEE and PAUL WISEMAN, Associated Press – Thu Nov 11, 6:10 pm ET
SEOUL, South Korea – The world's economies stand on the brink of a trade war as leaders of rich and emerging nations gather in Seoul. A dispute over whether China and the United States are manipulating their currencies is threatening to resurrect destructive protectionist policies like those that worsened the Great Depression.
The biggest fear is that trade barriers will send the global economy back into recession.
Hopes had been high that the Group of 20, which includes wealthy nations like Germany and the U.S. and rising giants like China, could be a forum to forge a lasting global economic recovery. Yet so far, G-20 countries haven't agreed on an agenda, let alone solutions to the problems that divide them.
G-20 leaders were expected to issue a communique detailing results of the summit on Friday.
The delegates have clashed in particular over the value of their currencies. Some countries, like the United States, want China to let the value of its currency, the yuan, rise. That would make Chinese exports costlier abroad and make U.S. imports cheaper for the Chinese to buy. It would shrink the United States' trade deficit with China, which is on track this year to match its 2008 record of $268 billion.
But other countries are irate over the Federal Reserve's plans to pump $600 billion into the sluggish American economy. They see that move as a reckless and selfish scheme to flood markets with dollars, driving down the value of the U.S. currency and giving American exporters an advantage. moreAnd then there are the "cynics" who believe the Chinese might have a point, and the power to make it.
Deadlock at the G20 Summit
Mystifying the Crisis
By PATRICK MADDEN
Despite angering some of its trading partners last week by pledging $600 billion towards another round of quantitative easing, the Obama administration went into the G20 summit in Seoul, Korea with high hopes. They wouldn't last long. Obama's agenda met with resistance immediately Thursday morning and was practically dead by the evening. First he failed to reach a free trade agreement with South Korea that was hoped to increase American exports of cars and beef. Later, a long meeting with Chinese President Hu Jintao failed to make any headway on a revaluation of the yuan or a preliminary agreement on an international mechanism to limit global trade and currency imbalances. China's has firmly rejected any policy changes that would slow down its growth engine, including even non-binding agreements on limits to trade imbalances. "Don't make others take the medicine for your disease," Yu Jianhua, a director general of China's Ministry of Commerce, told reporters.
The sickness referred to is obviously the US's trade and fiscal position, but the metaphor could easily be extended to the political situation in the Euro-American world more generally. Despite the severity of the crisis, there is no political direction to the measures being taken in the so-called developed world; and there is no political leadership of the sort that a Chavez provides in South America or the state itself in China. Thus it has proven impossible for Euro-American elites to bind together both general and particular interests, at either the regional or national levels. Obama has utterly lost the confidence of American voters, and has been unable even to build a consensus with traditional economic allies like the UK and Germany- both of whom are miffed by the recent US monetary interventions, but neither of who have anything resembling a long-term strategy for sustainable recovery. moreAnd there is this explanation of the coming USA-China currency wars.
And a post-mortem from the Chicago Tribune
U.S. left in the cold at G-20 summit
The meeting of the top industrial nations ends, and a U.S. proposal for balancing international trade is rejected, leaving Washington alone to deal with its weak economy, high unemployment rate and a burgeoning trade deficit.
By Don Lee, John M. Glionna and Christi Parsons, Los Angeles Times
November 13, 2010
Reporting from Seoul — The United States apparently will have to go it alone in dealing with its fragile economy and near-double digit unemployment after the Group of 20 summit ended Friday with no commitment to immediate action to reduce trade and currency tensions.
A U.S. proposal to set numerical limits on trade surpluses and deficits was rejected. Leaders of the world's 20 biggest economies pledged only to develop "indicative guidelines" to assess imbalances in the first half of 2011.
They also refused to endorse a U.S. effort to force China to raise the value of its currency.
"Any sense of global solidarity looks to have been yesterday's story," said Tim Condon, chief economist at ING Financial Markets in Singapore. moreEven the folks at the Roosevelt Institute think this might lead to a trade war. As if!
G20 Post-mortem: “Chimerica” has been a Chimera
Monday, 11/15/2010 - 2:47 pm by Marshall Auerback
A disastrous trade war may be coming our way.
There has been a considerable amount of discussion about current account imbalances in light of last weekend’s failed G20 summit. For the most part, the meetings focused less on currency levels per se and more on the underlying trade imbalances. In particular, they discussed the threshold at which both surplus and deficit nations should work to mitigate the extremes implied by deficits/surpluses in excess of 4% of GDP.
Of course, one could argue that the focus on current account imbalances, rather than exchange rates per se, was simply a means by which the Americans could discuss China’s pegged rate regime so that Beijing didn’t appear to succumb to US pressure and “lose face”. But fundamentally, the US dollar/Chinese yuan exchange rate has long constituted a huge source of financial instability in the global financial architecture. Although today’s focus on China tends to highlight its huge and growing bilateral trade surpluses with the US (and to a lesser extent, the Euro bloc), less appreciated is the degree to which its exchange rate policies have historically impacted its Asian neighbors and continue to do so to this day. As recently as 1994, Beijing precipitously devalued the renminbi against the greenback, taking it from 5 to 8.4, a 60%+ devaluation. Even this action understates the magnitude of the change, since it was preceded by a period during which the country’s monetary and financial authorities embraced a policy in which the yuan declined some 60 percent against the dollar.
So much for the need for policy incrementalism, as the Chinese persistently respond today when confronted with calls for a substantial yuan revaluation! In the late 1990s, Beijing’s earlier policy of “beggar thy neighbor” might have engendered comparatively minimal disruption domestically, but it exported the economic dislocation to East Asia and Japan. The cost advantage of these devaluations, conferred on China’s exporters, significantly eroded the trade competitiveness of other East Asian and Japanese exporters. They therefore threw their collective current accounts into substantial deficit by the mid-1990s and set the stage for the Asian financial crisis of 1997 and Japan’s “lost decade.” more