Cheap production is dominating as consumers are highly price sensitive. Such being the case, economy stimulation by using monetary policies that devaluate the national currencies and boost exports are superior to the commitments to ensure the stability of the currency.
Increased liquidity in US by implementing QE2 will devaluate the dollar, but most likely will not serve to develop national businesses, because loose capital has a tendency to flow into emerging economies that generate higher returns. As long as the economy of the emerging countries mainly depends on the exports, the low value of the national currencies remains a prime goal as well. However, emerging counties have advantages in the war of currencies. Asian countries imposed taxes to restrict capital inflows and acquired foreign assets probably will generate additional incomes. So, we may expect larger economic imbalances in the future.
Even though the agreement to control the economy growth by limiting current account surpluses and deficits to 4 percent of GDP was reached at the G20 meeting in Seoul, is it possible to manage instability when the money supply clearly follows the demand?
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- Asta Pravilonytė
- Every manager can call him or herself a good strategist if he or she only works within an environment that is favorable; however, it is only in times of stress that one truly learns what one's capabilities are!
There is a home bias in investment. Despite most of your coment is correct, you should remember that most of american companies will prefer to invest in US. And low interest rates and money abundace makes capital investment, M&A's and real state more attractive. So Americans will enjoy good consequences from QE2.
ReplyDeleteI think we should be looking for solutions to become more competitive, reduce our import, increase export, make our systems more efficient and organise our societies to live better for less.
ReplyDeleteHenry Gilbert