- Global imbalances widening again, pre-crisis patterns are re-emerging
- More effort need to rebalance world growth, including via exchange rate agreements
- If no measures taken, surpluses/deficit likely to remain big, could trigger protectionism
- Must see sustained implementation of China’s pledge to allow yuan to appreciate
The EU has this exactly right. The conditions that fundamentally set the stage for the credit bubble throughout the global economy remain in place. All the reform done since the credit crisis are for naught if China does not stop stockpiling reserves and allows its currency to find its own level,
In order for China to take that step, they need to be seen as having gotten something in return. The west must be willing to give China something in exchange for its cooperation.
They will want the Fed to halt QE, which they (and many others) feel is destabilizing. They may have to settle for less…
