The gentlemans agreement has been put to the test.
For us to say that $600,000,000.00 or, $600 Billion was not as bad as some thought, only proves that conditioning one’s mind works. I have never heard the Trillion dollar figure so much in my life as I have in the last two years. Even as a kid when I would say to the extreme that I wanted 6 katillion, bazillion, million of whatever I wanted most at the time. After hearing Trillion consistently for this long, it makes Billion not sound so bad.
But Brazil is not happy, nor is Korea, Germany and others. All members of the G-20 that meet next week to make a third attempt to solve the currency war. In reality The United States had wanted to use the G20, which groups developed and emerging market economies that account of 85 percent of global output, to agree firm numerical targets for current account balances and to reiterate a commitment not to undertake competitive devaluations.
Some have taken the easing as an offensive move we predicted if the Fed did too much QE. Now it seems that we should have been in line with the Bank Of England and paused our QE, and left an open back door if needed. Seems like any figure that was announced today would have caused the phone calls, emails and conversations that took place today. The only difference would have been the extremeity of the actions taken.
South Korea’s Ministry of Finance and Strategy sent “a message to the markets” on Thursday saying it would “aggressively” consider controls on capital flows while Brazil’s Foreign Trade Secretary said the Fed’s move could cause “retaliatory measures.”
In fact Korea appears to be preparing as much for a time when the current bubble in emerging markets bursts as for dealing with current inflows.
Seoul has held off announcing controls on capital flows for fear of embarrassment ahead of the G20, but others who will participate have been less shy.
China says, “We must consider what is good for us”
Bernanke, who have your decisions been good for?
Hopefully that answer really is America, it doesn’t seem China is willing to sacrifice itself for a global dream. Maybe the US should do the same.
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