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Barron''s interviews James Turk on the coming collapse of the dollar
Finance meetings focusing on China,
poor nation debt, Iraq, and oil
By Martin Crutsinger
Associated Press
Saturday, October 2, 2004
WASHINGTON -- The world's major economic powers
were far apart Saturday on agreeing how to provide
debt relief for Iraq and the poorest nations, as
finance officials began broader discussions about
the global economy.
Treasury Secretary John Snow and Federal Reserve
Chairman Alan Greenspan led the U.S. delegation to
the meeting of the International Monetary Fund's
policy setting body. The issue of easing the debt
burden, particularly in Africa, was high on the
agenda.
British Chancellor of the Exchequer Gordon Brown,
the chairman of the group, has offered a British plan
to pay for expanded debt relief by revaluing the IMF's
gold reserves according to world prices and by
getting wealthy nations to commit more resources.
By contrast, the Bush administration is pushing a
proposal that essentially would mean the most
impoverished countries would not have to repay
existing loans. But new loans would be reduced by
the amount of increased debt forgiveness the
countries received, under this approach.
Aid groups welcomed U.S. support for expanded
debt relief, but they prefer the British plan.
Failing to narrow their differences on Friday, the
Group of Seven major industrial countries pledged
in a statement to "prepare a progress report on
these efforts by the end of the year."
With its plan, the United States also hoped to
win support for erasing as much as 95 percent
of Iraq's $120 billion in foreign debt.
France and Germany, however, say they are
willing to provide 50 percent debt relief for Iraq
this year and will return to the issue in three
years when, they hope, Iraq is more stable.
Snow expressed confidence in an eventual
resolution.
"We will have ample opportunity to address this
later. We are making progress," he told reporters
Saturday during a break in the meetings.
German Finance Minister Hans Eichel said, "It's
quite clear we'll have a solution" by year's end.
The three days of talks were to wrap up Sunday
with the annual meetings of the 184-nation IMF
and its sister lending agency, the World Bank.
The meetings were taking place under tight
security. In August, the administration reported
that the IMF and World Bank were on a terrorist
target list of major financial institutions.
Police put up barricades more than a dozen blocks
around the two headquarters buildings a few blocks
from the White House. Five snow plow trucks were
parked in a row in front of the World Bank entrance
to guard against truck bombs.
In addition to debt relief, U.S. officials lobbied their
Chinese counterparts to commit to no longer linking
their currency, the yuan, closely to the value of the
dollar. The effort is intended to address the bulging
U.S. trade deficits and nearly 3 million lost
American manufacturing jobs.
U.S. companies contend China's practice has
produced a yuan that is as much as 40 percent
undervalued against the dollar.
China refused in discussions with the United
States and also in broader talks with G-7 officials
to say when it might stop linking the yuan to the
U.S. dollar. The Chinese pledged only to "push
ahead firmly and steadily to a market-based
flexible exchange rate."
Many private economists believe it could be years
before China is willing to give up the trade benefits
it enjoys from a tightly controlled exchange rate
that makes its products as much as 40 percent
cheaper than American-made goods. The U.S.
trade deficit with China soared to a record $124
billion last year.
Snow insisted that China was serious about
moving toward a new currency system.
"I'm not going to put a clock on it, but as soon
as possible is what we're looking for," Snow said.
"We're saying: Can't this move faster?"
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