To Pass The Buck

The editorial in the July/August/ September issue of

Textile World Asia
expressed hope for an upswing after the recent financial crisis. The whole world is smiling
more than in 2008 and 2009.

However, this smiling face recently has turned into a somewhat grumpy grimace — not least
because of the growing success of the Asian economy in general, and Chinese economic success in

In the shadow of a growing importance of the Chinese renminbi, East and West are blaming each
other for manipulation of the Chinese currency. The heat is on, one could say, and Eastern and
Western nations are passing the buck to one another. What’s the problem? After the crisis in 2008
and 2009, many nations are trying – and this is their fundamental duty – to accelerate their
domestic economies. In the past, the federal bank of a country whose currency came under pressure
tried to support its currency by taking adequate steps to regain its strength. This time, it seems
that some nations are quite happy with their weak currency. This will, they think, increase the
chances for a strong export industry.

This thinking might be right, but only for a very short time. After the World Trade
Organization treaty was established with somewhat open borders, many nations have been thinking
about increased duties and tariffs. The consequences of these shortsighted activities could be
dramatic for the countries in question. Many experts have warned about artificial currency and
exchange rates. Today, the global economy is so intermingled that in the long run, only global
concepts can survive.

The International Monetary Fund (IMF) is one of the tools used to orchestrate global
activities. But it seems nobody wants to talk to one another, but instead to put the blame on its
counterpart’s shoulders. There are not simple difficulties; they are dramatic. With drastic words,
the situation was described by the head of the IMF as one in which the big economies are starting a
currency war, which is more hazardous than a military war. All this is extremely dangerous. The
whole situation looks like a “devaluation race,” as one expert from the IMF mentioned. This race
could end in a dead-end street, with losers if the involved parties do not rethink their
shortsighted activities.

October/November/December 2010