The Big Blink – Project Syndicate
by Gilbert Keith
In the ongoing showdown over currencies, who will blink first? The US (and other industrial countries) could argue that it has high levels of unemployment and should be free to adopt policies that boost growth, even at the expense of growth in emerging markets. These countries, in turn, could argue that even very poor US households are much better off than the average emerging-market household.
Rather than bickering about who has the stronger case, it would be better if all sides compromised – if everyone blinked simultaneously. The US should dial back its aggressive monetary policy, focusing on repairing its own economy’s structural problems, while emerging markets should respond by allowing their exchange rates to appreciate steadily, thereby facilitating the growth of domestic demand. Is it too much to hope that the G-20 can achieve such a commonsensical compromise?
Sensible commentary from Mr. Raghuram Rajan