Feb. 6 (Bloomberg) -- Major economies with inflexible currencies must consider strengthening them if the global economy is to be weaned off its dependence on U.S. spending and Asian savings, according to a report prepared for a meeting of finance chiefs from the Group of Seven.
“Countries with inflexible nominal exchange rates must permit greater flexibility in real exchange rates either through higher inflation or a nominal appreciation of their currency,” the document, drawn up by Canada’s Finance Ministry and obtained by Bloomberg News, said.
G-7 finance ministers and central bankers are meeting in Iqaluit, Canada, today as policy makers seek to avoid a widening of distortions such as the U.S. trade deficit and the Chinese current-account surplus, which economists blame for helping deepen the worst postwar worldwide recession.
“While global imbalances were not the primary cause of the financial crisis, there is little doubt that they were an important contributor to the recession we faced,” the G-7 document said. “For global growth to be sustainable, it must be balanced.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ayv5906uYFGo&pos=2
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