http://www.spiegel.de/international/business/0,1518,druck-722520,00.html
A few highlights from the interview:
SPIEGEL: How could these currency conflicts be defused?
Rajan: I think this has to do with more than just currencies. It is very convenient for industrial countries to point to currency intervention as the problem, because they are not directly guilty of that. Is it any surprise that China resists an international agreement where the sole focus will be exchange rates? But industrial countries are not beyond reproach on the kind of policies they have been following in recent years. Let us remember where this crisis originated ...
SPIEGEL: ... in the United States when the real estate bubble burst and the financial crisis broke out. So you think the equivalent of the Chinese policy of an undervalued currency is the American policy of cheap money.
Rajan: In some ways, this is a zero sum game because everyone is trying to get at the same sources of demand. We need better global dialogue on a whole gamut of policies, with nothing being taken off the table. But there is no appetite for that.
SPIEGEL: If China allows the yuan to rise, as you suggest, what would the Americans have to do? How should the United States change its monetary policy?
Rajan: There are still hidden fractures that threaten the global economy. The United States papers over it with an extreme degree of stimulus which creates conditions for excessive consumption and investment. We are pressing too hard on the accelerator here. Just look at the interest rates: They remain at a very low level, which is quite unusual. We are witnessing a recovery, but it is a false, unstable recovery.