Leaders Butt Heads Over Quantitative Easing at G20
Developed and emerging countries are butting heads at the G20 summit over the issue of tapering quantitative easing, Reuters reports. Many developing countries, such as India and China, have resounded calls for the United States to be mindful of the effect of its monetary policy on the rest of the world. In the wake of declining currency values in emerging economies, most notably the recent tanking of the Indian Rupee, fears have risen over whether an economic crisis comparable to the Asian crisis of the late 1990s could be triggered.
The first step that the so-called BRICS countries have taken is the announcement of a $100 billion fund to stabilize currency rates. However, some analysts are concerned that the fund will be too little, too late, as it will take some time for the fund to be fully functional. In addition, the $100 billion figure could very well be too little were a major run-in on one of the contributors’ currencies to occur.
The American response so far has been subdued, calling for developing economies to improve their own structures if they wish their currencies to maintain value. While representatives of emerging economies say that internal soundness is of vital importance, they claim that a sudden tapering of quantitative easing would be a failure on the part of the U.S. to live up to its global responsibilities. Exactly what the U.S. is expected to do as a global economic recovery remains very tentative is still uncertain.