In the aftermath of the global financial crisis, tepid growth and low demand have decreased the share of wealth to be split among nations. In response, central banks have ratcheted up their balance sheets, weakening their currencies and exporting deflation to their trading partners. At an AEI event on Monday, a panel of experts addressed whether the world is entering a more intense phase of currency war that will threaten global recovery.
Jeffrey Frankel of Harvard University argued that the "emerging" monetary-policy disagreements have actually always existed. Anne Krueger of Johns Hopkins University supplemented this view by pointing out that the major capital adjustment that was necessary before the global financial crisis remains necessary, yet the political will to carry out the adjustment still does not exist. According to Rakesh Mohan of the International Monetary Fund (IMF), the IMF, which has a pivotal role in the monetary system, is ill-equipped to address this issue because it cannot adjust fast enough to meet the huge surge in capital flows from developed nations.
Alberto Musalem of Tudor Capital Management offered a more market-based perspective, claiming that the necessary reforms are really rather small, but too contentious to be proposed. Central banks, he said, have pursued rational domestic policies but have largely ignored the international effects. In closing, AEI's John Makin predicted rough times ahead for the global economy as nations try to adjust their government finances and central banks print money.
Online registration for this event is now closed. Walk-in registrations will be accepted.
Central banks in Japan, the United Kingdom, the United States, and the eurozone are responding to financial woes by printing more money, giving rise to fresh concerns about the outbreak of a currency war. With massive expansions in the balance sheets of the Bank of England, Federal Reserve, European Central Bank, and Bank of Japan, exchange rates have moved sharply over the past year.
In the wake of the G20 meetings addressing competitive currency devaluations, this expert panel will discuss if this feared currency war is indeed underway and what concerns might arise as global quantitative easing continues. The panel will also discuss how exchange rate fluctuations might threaten the global economic recovery and chart a prudent way forward.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.