Chinese currency is 16% weaker than it should be based on economic fundamentals. In June Friedrich Merz, the German Chancellor, raised the idea of reprising the Plaza Accord, the deal from 1985 signed by the finance ministers of America, Britain, France, Japan and West Germany to weaken the then astoundingly strong dollar with co-ordinated currency intervention. Plaza occupies a totemic position among foreign-exchange traders. The dollar dropped by around 30% against the currencies of America’s major trading partners by the end of 1987. George Soros made what he referred to as “the killing of a lifetime”—and his name as a hedge-fund macro trader— betting on the appreciation of the Japanese yen, British pound and Deutschmark. But if modern-day Soros wannabes hope for a repeat, they stand to be disappointed. Conjuring a new accord to strengthen the world’s seemingly undervalued currencies would be far more challenging today than four decades ago. And even if it could be reached, it may turn out to be far less effective. One reason is the sheer size of today’s currency market. The foreign- exchange reserves of the five countries that met at the Plaza Hotel in New York have swelled 14-fold since 1985, from $132bn (less than 2% of their collective GDP in 1985) to $1.9trn (more like 4%). But that pales in comparison with the growth in currency trading. In 1986, when the Bank for International Settlements, a club of central banks, first published its survey of the global foreign-exchange market, it estimated daily turnover at around $200bn. By 2024 this had risen to $12trn, a 60-fold increase. The ability of the five Plaza signatories to throw their weight around has therefore diminished markedly. To have the heft to affect markets, a deal would therefore need to involve another signatory—China. The world’s second-biggest economy has by far the biggest foreign-exchange reserves, of $3.4trn, as well as a currency which the West accuses of being unfairly cheap. A new Plaza Accord without China would therefore be like the original one without Japan— which is to say pointless.
Yet Chinese involvement is unlikely. To policymakers in Beijing the Plaza Accord is a byword for foreign subjugation. In particular, they see the stronger yen that emerged from the agreement as the cause of Japan’s subsequent lost decades, helping provoke a recession that led the Bank of Japan to keep interest rates too low for too long, which in turn fuelled a boom in asset prices eventually followed by a bust that Japan is shaking off to this day. This economic logic is flawed—China is suffering a property bust similar to Japan’s all on its own, without Plaza-like constraints. But good luck persuading Communist Party officials to ignore it. Even if, somehow, they might be convinced, a new Plaza Accord may not have the same effect on currencies as the original did. In 1985 the promise of currency intervention was paired with that of American fiscal rectitude: the Gramm-Rudman-Hollings Balanced Budget Act, which was moving through Congress as the finance ministers met at the Plaza, did not balance the budget but did help lower the deficit from 4.8% of GDP in 1986 to 2.7% by 1989, and weaken the dollar. Nowadays America’s budget deficit is around 6% of GDP and Congress has no Gramm, Rudman or Hollings, let alone three pro-austerity lawmakers, to press for belt-tightening. The importance of other forces became clear in February 1987, when officials met again, this time in Paris, and tried to stem the slide in the dollar, not its rise. Yet the dollar kept sliding. Today other factors—be it American deficits or Chinese demurral—also conspire against straightforward outcomes. Traders eyeing easy profits from a new Plaza must be careful what they wish for. ■ Subscribers to The Economist can sign up to our Opinion newsletter, which brings together the best of our leaders, columns, guest essays and reader correspondence. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/30/a-new-plaza-accord-for- global-currencies-wouldnt-work
Finance & economics | Predicting the future Is The Economist always wrong? We used artificial intelligence to test the accuracy of our forecasts July 2nd 2026 The tone of pronouncements made in the leader pages of The Economist has been likened to the “voice of God”. The comparison is not meant flatteringly. But it raises a fair question. A deity would be omniscient. How accurate, by comparison, are our predictions? Rigorous fact-checking usually saves us from embarrassing errors about the present. The future is trickier. In 1999 we said oil could fall to $5 a barrel, from around $10 at the time. That $10 turned out to be a generational low. Prices rose more than tenfold in the next decade. Then, in 2013, we called a peak in global oil demand. Today it is still stubbornly trundling upwards. This April we said that oil
markets were in “La La land” about the war in Iran and predicted a spike in prices. They have since fallen by about a third. Perhaps the black stuff is our bête noire. Yet these howlers, and others, have given rise to the charge that, far from being all-knowing, The Economist is so reliably wrong that the smart move is to bet against it. There is no better time to double down on a stock-market rally than when we start fretting about a bubble. Last year the then chairman of Reform uk, a populist-right party, called The Economist the “ultimate contrarian indicator”, while complaining about our criticism of his party’s fantasyland fiscal numbers. (A few months later, the party reversed course and ditched those policies.) Is the accusation fair? Or can The Economist lay claim to a creditable forecasting record? Predictive perfection is not our goal and we aim mainly to inform and stretch minds. But ideally we would be right more often than wrong. To assess our record with something approaching neutrality, we took the 7,000 or so leaders The Economist has published this millennium and fed them into gpt-5.5, an artificial-intelligence model. We asked it to assess whether each leader had made a falsifiable claim about the future as part of its main thesis. About 1,400 did. We then extracted those predictions, and asked the AI to mark out of ten both how contrarian
the leader’s outlook was at the time and how accurate the prediction turned out to be. We ran those queries several times and took an average. Overall, the ai assessor’s conclusions are reassuring, at least for those of us who make a living writing (and occasionally predicting) for The Economist. Unsurprisingly, prognostications that aligned heavily with conventional wisdom tended to prove accurate. The handful of calls that were wildly at odds with conventional wisdom at the time were less so. But neither of these results tells you much about The Economist‘s predictive powers. Across the wide middle ground where The Economist was neither safely conventional nor exceptionally daring, the newspaper had consistently better-than-even odds of getting the future right. The chart below puts some numbers on that. Up to a contrarianism score of around seven out of ten—a leader asserting (correctly) in 2013 that bitcoin had staying power or one suggesting (incorrectly) in 2000 that Europe would outgrow America over the next decade—the average prediction comes out more right than wrong. Cast your mind back to the turn of the millennium, when our leader sample begins. We were preoccupied by transformative technology. Market optimism seemed to be teetering on the delusional. As the dotcom crash took hold, we fretted (accurately) about America’s economic pain spreading to Europe and Asia, and (unnecessarily) about a second dip in growth. But soon we began to fulminate about the next crisis—which started in America’s housing market and culminated in the worldwide financial mayhem of 2007-09. By 2003 we were warning readers that housing markets looked frothy and calling America’s carmakers “an endangered species”. By 2004 our worries extended to stocks; easy monetary policy was pumping out overly cheap liquidity. In 2005 those concerns were more acute. We put a plummeting brick labelled “House Prices” on the cover, with the strapline “After the fall”. In early 2006 our cover likened the American economy to a stick of dynamite. Over the next few years the housing market, then the stock market, and finally the global economy collapsed. We had hoped that strong growth outside America would prop up the rest of the world, and argued that
as “America drops, Asia shops”. Instead, global gdp fell, even though a few Asian economies held up. Our warning in late 2007 about “America’s vulnerable economy” (illustrated with a version of the poster for the film “Jaws”) turned out to be more on the money: by the start of the following year, most forecasters were expecting a recession. In 2011 we returned to an image of swimmer and shark to warn about a “double dip” downturn. Like ten years earlier, that fear proved to be unfounded. If The Economist was downbeat about the world’s economic prospects, we were exuberant about technology. Sometimes this exuberance turned out to be justified. We declared smartphones the future of computing in 2002, said that something like streaming would devour DVDs in 2008, and cautioned in 2011 that a flood of Chinese-made cars would wash over the West. Still, our techno-optimism occasionally got ahead of itself. Distributed electric grids (boosted by The Economist in 2000), cheap bioethanol (2003), open standards for social media (2008) and augmented reality (2016) have yet to bring about the breakthroughs we prophesied. And then there is politics. It is not easy to foretell the decisions of voters or, for that matter, mercurial autocrats. The Economist was convinced by the false claim that Saddam Hussein was hiding weapons of mass destruction, but was right in 2003 to doubt Vladimir Putin was a true democrat. We toyed with the idea that China’s Communist Party might give ground on democratic reforms. In America we correctly forecast that Ted Cruz would not win the 2016 election, but for the wrong reason: we thought that his combative antics would alienate moderates. In fact, Donald Trump offered an even more furious alternative and still bested Hillary Clinton. When covid-19 began infecting the globe, we were ahead of the crowd. By late January 2020, long before governments started ordering shutdowns, we had sounded the alarm that the disease would spread worldwide. By the end of February, we said it would be a pandemic. Stock markets tumbled by a quarter in the following weeks. Once pandemic stimulus spending fuelled inflation in 2022, we expected a much sharper rise in interest rates than the Federal Reserve, or bond markets, were pricing in. That turned out to be correct; our next bet, that this tightening would lead to a recession, did not.