Currency War
Currency war
From Wikipedia, the free encyclopedia
Currency war involves states competing against each other on the foreign exchange markets to achieve a relatively low exchange rate, in order to boost their exports. Currency war, also known as Competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their home currency, so as to help their domestic industry. Competitive devaluation has been rare through most of history as even at times when a system of fixed exchanges rates has not been in place, countries have generally preferred to maintain a high value for their currency or have been content to allow its value to be set by the markets. A widely recognized episode of currency war occurred in the 1930s. According to Brazil 's finance minister, Guido Mantega, and to several financial journalists, a global currency war in on the verge of erupting in 2010, though this has been disputed by other commentators. The currency war of the 1930s is generally considered to have been an adverse situation for all concerned; with all participants suffering as unpredictable changes in exchange rates reduced international trade. The 2010 outbreak of competitive devaluation is being pursued by different mechanism than was the case in the 1930s and opinion among economists is divided as to whether it will have a net negative effect on the global economy.
Reasons for intentional devaluation
During most historical periods it’s rare for governments to intentionally devalue their currencies. For a country with low levels of unemployment, it’s more common to consider a strong currency desirable. A high exchange rate means a nation 's citizens will enjoy more purchasing power, both when they buy foreign goods and when they travel abroad. It helps keep inflation down. A strong currency has often been considered a mark of prestige. However when a country is suffering from high
From Wikipedia, the free encyclopedia
Currency war involves states competing against each other on the foreign exchange markets to achieve a relatively low exchange rate, in order to boost their exports. Currency war, also known as Competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their home currency, so as to help their domestic industry. Competitive devaluation has been rare through most of history as even at times when a system of fixed exchanges rates has not been in place, countries have generally preferred to maintain a high value for their currency or have been content to allow its value to be set by the markets. A widely recognized episode of currency war occurred in the 1930s. According to Brazil 's finance minister, Guido Mantega, and to several financial journalists, a global currency war in on the verge of erupting in 2010, though this has been disputed by other commentators. The currency war of the 1930s is generally considered to have been an adverse situation for all concerned; with all participants suffering as unpredictable changes in exchange rates reduced international trade. The 2010 outbreak of competitive devaluation is being pursued by different mechanism than was the case in the 1930s and opinion among economists is divided as to whether it will have a net negative effect on the global economy.
Reasons for intentional devaluation
During most historical periods it’s rare for governments to intentionally devalue their currencies. For a country with low levels of unemployment, it’s more common to consider a strong currency desirable. A high exchange rate means a nation 's citizens will enjoy more purchasing power, both when they buy foreign goods and when they travel abroad. It helps keep inflation down. A strong currency has often been considered a mark of prestige. However when a country is suffering from high
References: October 10, 2010, New York Times Currency Rift With China Exposes Shifting Clout