America Declines To Lead

Derek Scissors / November 12, 2010

20 people with very different backgrounds are unlikely to reach consensus on anything substantial. To forge such a consensus requires leadership. This week’s G-20 meetings produced nothing of substance, which is no surprise because the United States did not lead.

First, let’s dispense with the idea that America can’t lead. The American economy is more than one-third larger than the second- and third-largest, China’s and Japan’s, combined. The dollar is the world’s currency. When they get nervous, central bankers all over the globe buy U.S. Treasuries, no matter how low the yield is. America, and only America, can lead.

But we didn’t and we haven’t. Our last G-20 initiative, to fight government intervention in currency markets, went nowhere. One reason it went nowhere was suspicion that the real American goal was not to uphold the principle of open competition but rather to devalue the dollar. This suspicion turned into open accusation when the Federal Reserve moved to dump yet more dollars into the international system. (more…)