FOCUS – The “currency war” is a central concern of the leaders of the world. What is it? Why? Who are the winners and losers? Explanations.
There is no blood in this war there, if indeed it can be called “war”. In any case, international conflict has lasted for centuries: the weapon of competitive devaluation is easy to use, a priori very beneficial for the person who clicks, but it is also an attack on the economy of all other countries. The worst risk is that all other countries are fighting a devaluation devaluation. World trade will lose its little balance, and sirens of hyperinflation rugiraient. A situation that no country in the world, developed, emerging or developing countries can not (re) experiment. Explanations.
• The “currency war”, what does that mean?
The “war of currencies” or “currency war” or “currency war” is the battle between the countries of the world to be as competitive as possible, via economic policies – including money – which allows them to lower the level of their national currency against other currencies. In reality, it is to practice what is known as a competitive devaluation.
• Why do we speak of “war”?
This is the Brazilian Finance Minister Guido Mantega, who on 27 September 2010, angered by the Brazilian real too strong beating down its economy, spoke of “currency war.” Quoiqu’exagéré, the term was immediately a success and international media. In fact, the devaluation has existed for centuries, and in the economic history of the world, the use of this weapon was … commonplace.
“Read: Eight lessons of economic history, Jean-Marc Daniel (Odile Jacob)
• Why is it advantageous to have a weak currency?
Because a weak currency compared to other favors exports of a country. On the other hand, imports become more expensive, pushing households to consume “home”, but more expensive (devaluation is a form of protectionism). In the end, the domestic industry is doped, triggering a virtuous circle of economic growth, consumption, employment and ultimately revenue.
• Why is devaluing source of international conflict?
A country devalues its currency unilaterally and strongly reinforces its economy at the expense of jobs in other countries. This creates an imbalance of world trade denounce these other countries tempted to do the same. If everyone devalues and (at this point, we can talk of “war”), firstly, it cancels the positive effects of devaluation and, ultimately, will no longer remain the disadvantages of such a maneuver, namely massive money creation leading to higher global prices. However, inflation has become an uncontrollable phobia for the world economy: history has shown that hyper-inflation pushes social revolt (even more than unemployment), and sometimes leads to real-War.
• What are the countries that tend to manipulate their currency?
Some countries maintain artificially – more or less assumed – their currency at a relatively low level despite a healthy economy, as China with its yuan, the State control. This is the case in other Asian countries such as Hong Kong or Singapore. Are also included in the list of countries that operate for their money does not increase too much, the oil producers and gas, such as Saudi Arabia and Russia. In another vein, Switzerland, with his frank highly sought because very safe, do not hesitate to speak frankly to protect its economy. In the same context as too much money “refuge”, Japan (third largest economy in the world) has recently dropped its yen – a strong and unexpected – to (finally) get his economy his “liquidity trap” : twenty years of stagnant growth and deflation destroys wealth. A bomb Tokyo since reset the heated debate on the “currency war.”
“MY FIGARO – Criticized, Japan denies manipulating the yen
“MY FIGARO – How Japan has revived the currency war
• And the United States?
The United States also manipulate their currency as they can. And make sure they maintain a relatively low dollar (but not too much to risk losing the supremacy of the greenback) to – otherwise save – sustain their own growth, and hence the rest of the world. To this end, the Federal Reserve (Fed) – just as do Japan – injecting huge quantities of dollars (the famous quantitative easing 1, 2 and 3) in the economy by maintaining interest rates near zero infused continuously for investment, employment and consumption of Americans. This finally allows the United States to live beyond their means, with deficits and huge debt, which continued to rise dangerously.
“Read: Small and big stories currencies, Jacques and Jacques Trauman Gravereau (Eyrolles)
• Why the euro area remains immobile?
In this “war”, the European Monetary Union adopted the strategy of pacifism. In fact, she has no choice, since its central bank, the ECB focuses its attention on public deficits, public debt and inflation. It has no objective economic growth (unlike the Fed), which could encourage them to “play” on the euro to reach. Result, the euro is pretty strong, especially against the dollar (it takes about 1.35 euro for one dollar, still far from the known change to 1.60 in mid-2008): it is according to the index Big Mac, 11.7% overvalued. What penalize the economy of the euro area weakened by an industrial crisis and austerity measures to contain public finances.
“Europe will not participate in the currency war
“France has a lot to lose in the currency war
• What to do to clean up international monetary relations?
Already, stop talking about “war”. The overall message of the ruling heads heads most industrialized countries of the world remains “avoid competitive devaluation of currencies” and continue the commitment of countries “with respect to the exchange rate determined by the market.” The current situation is not as bad as three years ago, when China and the United States clashed publicly violamment and the yuan and the dollar. Since China has agreed to meet, slowly but surely – its currency.
After the end of Bretton Woods (1944 to 1973), the Plaza Accord (1985) fambée against the dollar in 1985, and then those of the Louvre (1987) to end interventions and market volatility exchange, France launched the G20 in 2008, particularly in the idea of finding an alternative to exaggerated supremacy of the dollar, since 1971, is no longer convertible into gold. The dollar is still king despite the creation of the euro in 1999, which allows the United States as of indiscipline on the pretext of saving the world trade.