An American economist has said that the world is in a currency war between the United States, China, Russia, and Japan, questioning the countries’ economic growth.
“The world is unfortunately in a currency war between the US, Japan, China, and Russia, keeping the interest rates very low and increasing the supplies of money and credit beyond normal, sustainable limits,” said Mark Thornton, senior fellow with the Ludwig von Mises Institute in Alabama and a research fellow with the Independent Institute in California.
Thornton made the comments following a report by the International Monetary Fund that China has overtaken the US as the world’s largest economy.
The IMF estimates that the size of the US economy is $17.4 trillion, while the Chinese economy comes in at $17.6 trillion, Business Insider reports.
However, these figures are adjusted for the relative costs of living in both countries, known as “purchasing power parity.” Without the purchasing-power adjustment, America’s GDP will total about $17.4 trillion, compared with China’s $10.4 trillion, the IMF predicts.
Thornton said that economic growth in the United States during the past decade was mostly based on the government’s borrowing and spending which led to the massive national debt and subsequent deficits.
“In the US, the GDP growth has been driven largely through a process of large government deficits and the burgeoning national debt,” he said.
“An unprecedented radical monetary policy of keeping interest rates very low” also contributed to an unsustainable economic growth, Thornton told Press TV on Wednesday.
The American economist said China’s growth policies are also questionable and will not be sustainable in the future.
“They (China) have a lot of planned investment in infrastructure, housing, office space and the building of giant skyscrapers and they have a lot of inventory of all those products and under utilization of infrastructure investment,” he noted.
China remains the biggest foreign holder of US government debt, holding an estimated $1.27 billion in US Treasury bonds.
The United States accuses China of lowering the price of its exports by manipulating its currency.
“Growth is a good thing, but in the case of China and the US, we have to question whether it’s natural, sustainable,” Thornton said.