United States offers currency system overhaul

US Treasury Secretary Timothy Geithner told a G20 meeting that tightly controlled exchange rate regimes are the main problem in the international monetary system while the solution to it is rather simple.

Addressing the attendants of the Chinese hosts of the seminar of the Group of 20 wealthy and developing economies Geithner noted that countries should have flexible exchange rates and permit free flows of capital to be major players in the global currency order.

Besides, the Treasury Secretary also called for a stronger International Monetary Fund and to defend U.S. policies, acknowledging that past failures had caused much damage but saying the government was aiming to stabilize debt levels to avoid future problems.

The meeting of the G2o leaders was led by France who is advocating a bold reform agenda.

Geithner offered a straightforward diagnosis. While major currencies moved freely and most emerging economies were well along that path, there were still some with little exchange rate flexibility and extensive capital controls, he said.

This asymmetry fueled inflation risks in the economies whose exchange rates are undervalued, magnified currency appreciation in others and also generated protectionist pressures, he added.