Currency Wars.I. PrefaceI.1
Several currency wars have been fought during last hundred andfifty years. No currency war was fought before 150 years in entire historyof money. At present (January, 2011) the currency war has already started.If it escalates, results can be severe. Senior Economists of the world areworried about currency wars. International Monetary Fund (IMF) andWorld Bank are also worried. Let us see in details these issues in thispaper.Currency movement and currency exchange rate can be abused to
another country. There are several ways of abuse. Most ways aredifficult to understand or realise. In this article we have a look at the waysof abuse. We take
become easier to understand.It can be several decades and even hundreds of years before asociety or nation realises that it has been exploited. The exploiter can
the exploited. Some people have mastered the art of exploitation.Even when the exploited feels exploitation, he cannot pinpoint real causeof his suffering.
2. What is Currency War?Common Definition.
people have defined “Currency War” as competitivedevaluation of one‟s own currency so that exports become more
competitive and imports become costly. As a result imports are expectedto reduce and exports are expected to go up. As a further result,employment within the country goes up and employment in thecompeting country may go down. The country which devalues itscurrency may get net trade surplus (exports more than imports) and itsforeign exchange reserves go up.This policy
is also referred to as “
Beggar Thy Neighbour
At present, U.S. Government‟s allegation is: “China is keeping the
value of its currency artificially low. Hence it has a huge trade surplusand large foreign exchange reserves. U.S. is suffering unemployment andtrade deficit because of Chinese policy.
U.S.A. tried to push China into revaluing Yuan. China told Hillary
Clinton: “Mind your own business. Instead of advising us, ensure the
When individual pressure did not work, U.S.tried international organisations and institutions to pressurise China.