Needed international monetary policies

During this these times of food, fuel, climate and financial crises the economic discourse rarely connects the monetary dimensions of the economic challenges ahead. Financial solutions are couched in rescue or investment terms of increasing liquidity by making loans available to banking and manufacturing in their respective countries. It seems that well-nigh all policy makers do not think in global terms for an economic system that is sinking ever deeper into a global recession.

Apart of the recent G20 meeting in Washington, D.C. and its sequel on April 20 next year countries and regions seem to deal with their economic stimuli without giving much attention to their currencies and exchange rates.

Particularly countries such as South Korea which had much foreign investment see the value of their currencies go down by some 30% against the dollar, while even countries such as Brazil with less dependence on foreign capital had their peso currency devaluate by some 18%. In the first case, investors left South Korea for 30 year US Treasuries, while they were invited by Brazil to shore up its currency. Of course, such “turmoil in currency markets threatened to reorder trade relations and complicate recovery efforts”. Cf. Washington Post, October 25, A01.

What is needed in these times of global economic downturn or recession is an urgent international approach that would reduce the wide swings in currency values and its associated exchange rates. What are needed are economic policies that include international currency stability where exchange rates would fluctuate within a predetermined band. Such policies are to take place within a transformed Bretton Woods system which would also include in its balance-of-payment system the debits and credits based upon the quantity of GHG emissions. A very tall order, but one that is necessary to transition into sustaining futures of both countries in the global North and South.