_The German question never dies. Instead, like a flu virus, it mutates. (The Economist, 21 October 2010)_
In late September 2010, Brazil’s Finance Minister Guido Mantega commented in Sao Paulo that the world was “in the midst of an international currency war.” His comments effectively ended all the premature praise for the G-20’s efforts at international cooperation with regard to the global financial crisis. In vogue came the assessment of the actual lack of cooperation as evidenced by the growing tensions and fault lines between the new global institution’s main protagonists, China and the United States, who disagree so starkly on the origin of the global macroeconomic imbalances. Those systemic imbalances – a large US current account deficit balanced by large current account surpluses in China, Japan, and Germany – have been identified as one of the main causes of the credit crunch of 2007-8 which led to the Great Recession. The central issue preventing a unified solution to the current crisis is whether the main cause of those imbalances is a global savings glut in Europe and Asia, or deficient savings and too loose monetary policy in the United States. This disagreement has risen to the forefront of the existing crisis debate as evidenced by Mantega’s remarks. No one point of view, or ”narrative,” so far seems to have won the day and allowed cooperative steps forward.