G20 Currency Battle Becomes 'Poker Game'

BOSTON (TheStreet) -- Leaders of the world's 20 biggest economies convene in Seoul for a gathering aimed at finding a way to coordinate and ensure a global economic recovery.

But as the key players at the meeting quibble over accusations of currency manipulation, one investment manager says the proceedings resemble a game of poker more than a meeting of powerful nations.

The Group of 20, or G20, summit is intended to help some of the largest nations develop a framework for balanced global growth while strengthening a regulatory system to prevent another widespread financial crisis.

But as the G20 meeting gets under way, the focus once again turns to fears of a currency war in which countries would attempt to devalue their money to help domestic exporters.

This comes after China and Germany took aim at the quantitative-easing measures recently announced by the U.S. Federal Reserve. The central bank announced earlier this month that it would buy an additional $600 billion in Treasuries in hopes of propping up the U.S. economy and boosting employment.

However, exporter countries such as China and Germany argue that the so-called QE2 will devalue the dollar, thereby helping U.S. exporters. The criticism is not unlike how the U.S. has accused China of keeping the value of its currency low for the benefit of its exporters.

Jason Pride, director of investment strategy at Glenmede Investment and Wealth Management, offers his view of the political struggle between nations over currency concerns.

What is your take on the G20 summit and the currency issues that are arising from it?

Pride: This is getting overblown. When you really look at what the U.S. is doing, there are offsets. It's not all about currencies and what the Fed is doing with printing money. That's only part of the story. When you look at the big picture, we are entering an environment of fiscal policy that is marginally restrictive [and] offset by monetary policy that is stimulative. That combination is happening on a near-term basis and that's how you actually address a deficit and debt problem that is outsized.

Chinese officials don't want to admit they should be supporting countries like the U.S. during a period of economic difficulty. Politically, who in China wants to be doing that? In reality, as far as the way the international coordination of monetary and fiscal policies go, it's probably the right outcome. China's primary export market is the U.S. Ultimately, their economy is tied to the U.S. and they want it to survive in reasonably good shape. There is an incentive for them to have some give-and-take in this situation.