Former Federal Reserve chairman Alan Greenspan says both the United States and China are pursuing a policy of weakening their currencies to the detriment of other economies.
Greenspan published his views on Oct. 11 in the Financial Times hours before the start of a G20 summit in Seoul designed to protect the global economy from lingering crisis amid a growing risk of protectionism.
"America is...pursuing a policy of currency weakening," Greenspan wrote.
"The suppression of the (Chinese yuan) and the recent weakening of the dollar are, of necessity, producing firming exchange rates in the rest of the world to, as they see it, the rest of the world's competitive disadvantage."
The threat of currency wars will dominate the agenda as the leaders of the Group of 20 advanced and emerging economies gather for two days in the South Korean capital.
Greenspan, who headed the Fed for nearly two decades until 2006, did not go into details about who in the United States was responsible for the weakening dollar.
However, a decision by the Federal Reserve under his successor Ben Bernanke to pump an extra $600 billion into the fragile U.S. economy is seen as in effect leading to a weakening U.S. currency.
"Even without protectionism, there are clear upside limits to the growth rate of global trade. Protectionism would accelerate that slowing," Greenspan wrote.
US Treasury Secretary Timothy Geithner said last month the United States backs a "strong dollar", arguing that as the holder of the world's reserve currency it recognized a "special responsibility" to forestall damaging exchange rate volatility.
Copyright Agence France-Presse, 2010
