“In circumstances where countries are facing undue burden of adjustment, policy responses in emerging-market economies with adequate reserves and”increasingly overvalued flexible exchange rates may also include carefully designed macro- prudential measures,” the G-20 leaders said in the statement.
Translation: You in the US are determined to devalue your currency, by sending hot capital flows (billions of dollars from purchased treasury bonds returning to investors all over the world). Your expressed goal is to create asset bubbles and to create inflation in other currencies. We, the rest of the world, will do everything we can to stop you.
“In economics, hot money refers to funds which flow into a country to take advantage of a favourable interest rate, and therefore obtain higher returns. They influence the balance of payments and strengthen the exchange rate of the recipient country while weakening the currency of the country losing the money. These funds are held in currency markets by speculators as opposed to national banks or domestic investors. As such, they are highly volatile and will be shifted to another foreign exchange market when relative interest rates make this more profitable.”
“Hot money is a major factor in capital flight, illicit financial flows, and the ability of developing nations to finance their debt. As large sums of money can move very quickly to take advantage of small fluctuations in interest rates and currency values, countries which have difficulty raising money through the sale of long-term bonds are particularly susceptible to short-term interest rate pressure, particularly during periods of rapid inflation. These types of transactions were largely responsible for the currency crises in Mexico and Asia during the 1990s. See 1994 economic crisis in Mexico and East Asian financial crisis.”
“In part to reduce the influence of hot money on a nationâ€™s economy, a few nations have minimum time requirements for investment. For example, Chile requires all foreign investments to be put in a one-year-locked account. Although this sort of control reduces investment in a country, it also makes its economy less susceptible to capital flight.”
The “hot capital flows” referred to by the G-20 must mean both the return of capital formerly invested in U.S. Treasuries — billions hanging around in foreign countries looking for somewhere to invest, as I heard one banker say this week — and the speculative flows in pursuit of what this might do to foreign investments and markets.
This is war, worldwide currency war. You had WW1, WW2, WW2.1 (cold war) … so this must be WW2.2. Or maybe just another skirmish in a war that’s been going on for a while now. Any thoughts?
I think this one is different because no nations are aligned with us this time, instead, they oppose what the US is doing. Plus, with a weak president here, they know there will no real ramifications for opposing us.
Hot money is hedge fund money, etc., and no doubt laundered and drug money too.
I don’t think this will end well.