Baseball91's Weblog

February 18, 2013

Competitive Currency Debasement

Filed under: Competitive Currency Debasement,currency,Monetary Wars — baseball91 @ 7:28 PM

Toxic waste. There was spillover on other neighboring countries from competitive currency debasement.

In the words of Kevin Kersten, SJ, life in the modern world has many sorts of enmities, whether between a husband and wife on the brink of divorce; a child abused by a parent; between rich and poor; between cheaters and the cheated; between adversaries in civil war; between bullies and their victims. “Whatever the sort of enmity between nations at war, only two options occur to me as possible for those embroiled in enmity: To let it be, or deal with it.  Really, there is no ‘in between’.”  

Exchange rate management: Over the past four months, the Japanese yen has risen in price from 78 to up around 94 US dollars. Japan was the last nation to follow a monetary policy for domestic considerations, which as a collateral consequence has seen a dramatic weakening of the yen against other currencies.

This weekend, the G20 refrained from censuring Japan and implicitly sanctioned similar conduct by other G20 nations. Criticizing Japan would have made other countries – particularly the US – also a legitimate target for criticism by other G20 members.

The internal discussion within the euro nations would now be over the euro’s rise on the foreign exchanges with or without a need to be brought under control? With a current-account surplus in Germany’s economic growth in 2013 for six out of the past seven years – six percent of gross domestic product last year – while France carried a deficit of 2 percent for 2012, the German people can live with a euro above $1.30 (or maybe even $1.40) much more than France and its other western neighbors, writes David Marsh. And with so little chance to meet its growth and budget-deficit targets this year, France is at odds with the policy of Angela Merkel’s government, the European Central Bank, as well as the Bundesbank. Because it is an election year in Germany, should a currency war break out in 2012, it likely will be between France and Germany. So the G20 backed off from addressing competitive currency debasement, to let the civil war begin within the European Union.

And so market forces, in bond market and stock markets, along with the current events since September 2008, for currency markets. For all currencies to be equally subject to the impartial discipline of a truly free and fair global market, no government today leaves the exchange rate of its currency to market forces, trying to use their competitive advantage.

“Letting an enmity be will likely make it worse.  Recrimination will increase.  Old hurts will get bruised and new ones will be perpetrated.  Grudges and resentments will fester.  Violence and bloodshed may even happen.  And all this will occur for the enemies facing one another from the two sides of a divide.” –Kevin Kersten, S.J.


1 Comment »

  1. Since April 4 through April 12, 2013, the Japanese yen has depreciated against all 16 of its most-traded peers. The yen has declined another 2.2 percent to the U.S. dollar, 3.5 percent to the euro, and 2.8 percent to Australia’s dollar.

    Comment by baseball91 — February 19, 2013 @ 1:42 AM | Reply

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