G20 Summit Update – Key Issues Remain Unresolved

ForexNewsNow | Published on November 12, 2010 at 11:39 am

G20 summitNEW YORK (Forex News Now) – The final G20 summit of the year has concluded in Seoul, South Korea, but has left many analysts and traders in the global forex trading community disappointed at the lack of firm agreement and commitment by the conference members on a variety of key issues.

The conference got off to a rough start on Thursday, with the United States, China, and Germany clashing over the thorny issue of trade imbalances. China and Germany are two of the world’s leading exporters, while the U.S. has endured a trade deficit since 1975.

President Barack Obama weighed in on the matter, expressing his desire to see balance return to the global economy for the benefit of all. “It is difficult to [boost growth] if we start seeing the huge imbalances redevelop that helped to contribute to the crisis that we just went through. I don’t think this is a controversial proposition.”

Despite his efforts, the conference ended with a weakened and loose commitment to restoring balance in trade, a measure that will likely lead to little change in the global forex trading world.

Conference Addresses Currency Manipulation – With Few Tangible Results

The issue of currency manipulation received a response that was somewhat more productive, though, with a vow to move towards market-determined exchange rates and shun competitive currency devaluations from the world’s financial leaders.

This only came after two days of contentious debates, however, primarily centered on the rift between the U.S., China, and other countries.  The United States has drawn fire recently for its $600 billion stimulus program that will weaken the value of the dollar – especially considering the U.S. has long criticized China for artificially keeping its yuan weak.  

The U.S. responded that its action was not the same as China’s policies, stating that the goal of the stimulus program is to stimulate growth in the economy, while China strives to increase its already-massive trade imbalance through an export-centric economy.

Doubts still remain, though, and for the moment, there is an uneasy consensus on the need for market-based exchange rates without solid, tangible plans on how to ensure them.

Conference Takes Aim at “Too Big to Fail”

One bright spot in the otherwise-disappointing summit was the conference’s decision to move ahead with actions designed to control the influence of financial institutions deemed “too big to fail”.

The conference jump-started a process that will create a list of such institutions across the globe.  Once identified, these institutions will be subjected to a series of tight regulations and rules that are designed to create stability, including rules that require banks to carry larger reserves and obey stringent capital and risk requirements.

With that being said, however, it is apparent that many of the main issues on the agenda will be left to develop on their own until the next G20 summit in November, 2011, in Cannes, France.

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