The Fed's decision, in essence, to print $600 billion and pump it into the economy through Treasury bond purchases has drawn fire from foreign leaders, notably German Finance Minister Wolfgang Schaeuble, who say it amounts to currency manipulation. The action seeks to lift the U.S. economy in several ways, including by lowering interest rates, boosting the stock market and weakening the dollar, which would make U.S. exports more attractive. Shouldn't $USD to go down and $XEU keep rising? Coming into the meeting, hopes have dimmed that the G-20 will go beyond general principles on trade and currency and add what U.S. officials have characterized as "meat on the bones."
"We were not able to come up with the specifics," South Korean President Lee Myung-bak, the meeting's host, said in an interview. "That will be left to a working group. It will take some time."
Discussions among the leaders are scheduled for Thursday and Friday, with preliminary G-20 sessions to begin Wednesday.
The Obama administration proposal, endorsed by G-20 finance ministers last month, calls for the International Monetary Fund to evaluate how each nation's policies help or hurt others. Even if the details of this program were agreed upon by world leaders, it remains unclear how nations could be forced to revise their policies if they run afoul of the IMF because there is no enforcement mechanism.
"The critical question is when the G-20 will move beyond platitudes . . . and on to something concrete, something that might prompt some member of the G-20 to deviate" from the decisions it would otherwise make, said Phil Levy, an analyst at the American Enterprise Institute.
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