G7 To Meet Friday in Extremely Difficult Circumstances
October 4, 2008
Since the latter half of the 1980’s, Group of Seven finance ministers and central bank heads have met three times each year to share information about their economies and to coordinate foreign exchange and some other policies. Their next meeting will be in Washington on October 10th. I have compiled a chronology below of what these meetings have said about foreign exchange and selected other areas. Levels of the dollar against the euro and yen and of oil prices at the time of the meetings are shown in the right-most column. Currency matters are not the main concern at the moment. The conversation will be about the deepening worldwide credit crunch, rapidly deteriorating economic outlook, are what governments and central banks can do to reduce the chances of a worst-case scenario. It would be a mistake, however, to ignore currency markets altogether. The dollar has performed well, and the euro has faded off its highs. These are two developments that officials were hoping to see. One danger to be avoided is a rout of the dollar. The dollar fiscal implications of the $700 billion bad-debt buyout bill are potentially adverse, and currency ramifications always arise in any discussion about coordinated interest rate changes.
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