NEW YORK (Forex News Now) – The recent slate of forex trading news regarding potential currency struggles in the works has led some to begin fearing a new Great Depression – including the head of the World Bank.
In an address given today, Robert Zoellick, the president of the World Bank, commented that world leaders have to take more action to defuse potentially volatile currency tensions before they plunge the global economy into another recession, or worse.
Zoellick is referring to the growing tensions in the global markets involving currencies and the hot topics of devaluation and trade wars. The most high-profile storyline has been the United States and other states criticizing China for keeping its yuan intentionally devalued to save its export-driven economy.
The fears of global currency wars and a breakdown of global cooperation, brewing now for well over a year, are the focus of World Bank and International Monetary Fund meetings to be held this weekend.
Referring to these “beggar thy neighbor” policies that seek zero-sum competition over cooperation, Zoellick said, “If one lets this slide into conflict, or forms of protectionism, then we run the risks of repeating the mistakes of the 1930’s.”
IMF weighs in
Dominque Strauss-Kahn, Managing Director of the International Monetary Fund, echoed these sentiments in another address. “I think it’s fair to say that momentum is not vanishing but decreasing and that’s a real threat. Everybody has to keep in mind that there is no domestic solution to a global crisis.”
Later, Strauss-Kahn went on to say, “It’s fair to say that many do consider their currency as a weapon and that’s certainly not for the good of the global economy.”
Both Strauss-Kahn and Zoellick were pointing their remarks in the direction of China for its devaluation, but other countries lately have made forex trading news for their currency manipulations. Japan, most notably, has already intervened to lower the value of the yen, and is sure to implement another intervention soon as the yen continues to rise.
Action by the world’s primary international financial organizations is needed to support the actions taken over the past two years by the world’s central banks. But, the cupboard for these banks is becoming bare, as interest rates in most major economic zones are almost as close to zero as they can be.
The policy options still available to the global community, as well as an increased need for heightened cooperation, will both be the forex trading news to be discussed this weekend as the IMF and World Bank both meet.