In spite of the national myths surrounding the virtues of a “strong currency”, great currencies like the US Dollar, the Pound Sterling and the Japanese Yen are falling in value. While the natural course of the 2007-08 economic crisis in these nations can certainly be blamed, eroding the value of currency has become a conscious decision by policy makers in central banks and is embraced by these countries’ governments. Alarmed emerging economies have accused these advanced countries of waging a covert currency war behind the veils of “quantitative easing” and “monetary stimulus.” Currency matters were even the subject of a recent G20 summit. But rather than a return to the destructive beggar-thy-neighbour currency policies of the 1930s, the new currency “wars” reflect the growing power of central banks and the changing ways in which they manage the economy.
by Scott Sutherland