Any Other Business | 23 October 2010

If I hear one more clunking metaphor about how we’re trapped in the debt mine but there’s light at the end of the tunnel, I think I’ll bury myself in the garden.

If I hear one more clunking metaphor about how we’re trapped in the debt mine but there’s light at the end of the tunnel, I think I’ll bury myself in the garden. But the grit, faith and, most of all, mutual support of the Chilean 33 have given us a new role model and it would be churlish to deny their political leaders — who just happened to be there at the time — a global curtain call. President Pinera looked so pleased with himself in London this week that I half expected to see him shimmy across the Strictly dancefloor waving a winning lottery ticket. And I was drawn, in a way that I might not normally have been, to an article in the FT by his finance minister Felipe Larrain.

His subject was the ‘currency war’ which last week’s IMF meeting in Washington failed to avert and which will dominate the coming G20 meetings in Seoul. In essence, the world’s developed economies are all trying to devalue their currencies to boost recovery by making exports more competitive. But the Chinese, whose advance has been based on keeping the yuan artificially cheap against the US dollar — thus, according to Obama supporters with an eye to the mid-term elections, continuing to destroy American jobs — have allowed only a narrow yuan revaluation so far. This stand-off, combined with the hot money that would be injected by Fed chairman Ben Bernanke’s proposed new round of quantitative easing, threatens unwelcome currency appreciation in many emerging economies elsewhere. Measures to restrict flows of goods and capital on several fronts may follow, and that can only be bad for global recovery — while the impact on commodity prices will add to the inflation risk Jonathan Ruffer warned us against last week in these pages.