User:Oceanflynn/sandbox/Currency intervention bibliography

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Currency intervention bibliography combines bibliographies from the article currency intervention also known as currency manipulations, currency wars, currency devaluation by creating a timeline with cited references on the global, historic and current use of the use of these terms particularly as it impacts on global economy and finance in 2016.

Chronology

For millennia, going back to at least the Classical period, governments have often devalued their currency by reducing its intrinsic value. Methods have included reducing the percentage of gold in coins, or substituting less precious metals for gold. However, until the 19th century,Despite global trade growing substantially in the 17th and 18th centuries. The proportion of the world's trade that occurred between nations was very low, so exchanges rates were not generally a matter of great concern.

Rather than being seen as a means to help exporters, the debasement of currency was motivated by a desire to increase the domestic money supply and the ruling authorities' wealth through seigniorage, especially when they needed to finance wars or pay debts. A notable example is the substantial devaluations which occurred during the Napoleonic wars. When nations wished to compete economically they typically practiced mercantilism – this still involved attempts to boost exports while limiting imports, but rarely by means of devaluation. Devaluation could however be used as a last resort by mercantilist nations seeking to correct an adverse trade balance – see for example chapter 23 of Keynes' General Theory

1700s A favoured method was to protect home industries using current account controls such as tariffs. From the late 18th century, and especially in Great Britain which for much of the 19th century was the world's largest economy, mercantilism became increasingly discredited by the rival theory of free trade, which held that the best way to encourage prosperity would be to allow trade to occur free of government imposed controls.

1776 in The Wealth of Nations Adam Smith claimed that mercantilist economic doctrine taught nations 'that their interest lies in beggaring all their neighbours'.

"The sneaking arts of underling tradesmen are thus erected into political maxims for the conduct of a great empire ... . By such maxims as these, however, nations have been taught that their interest consisted in beggaring all their neighbours. Each nation has been made to look with an invidious eye upon the prosperity of all the nations with which it trades, and to consider their gain as its own loss. Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity."

— Adam Smith The Wealth of Nations 1776

'Beggar thy neighbours' was originally devised to characterise policies of trying to cure domestic depression and unemployment by shifting effective demand away from imports onto domestically produced goods, either through tariffs and quotas on imports, or by competitive devaluation. The policy can be associated with mercantilism and neomercantilism and the resultant barriers to pan-national single markets.

1870-1914 The intrinsic value of money became formalised with a gold standard being widely adopted from about 1870–1914, so while the global economy was now becoming sufficiently integrated for competitive devaluation to occur there was little opportunity.

1918- Following the end of WWI, many countries other than the US experienced recession and few immediately returned to the gold standard, so several of the conditions for a currency war were in place. However, currency war did not occur as Great Britain was trying to raise the value of its currency back to its pre-war levels, effectively cooperating with the countries that wished to devalue against the market. This was against the interests of British workers and industrialists who preferred devaluation, but was in the interests of the financial sector, with government also influenced by a moral argument that they had the duty to restore the value of the pound as many other countries had used it as a reserve currency and trusted GB to maintain its value.

-1920s Competitive devaluation has been rare through most of history as countries have generally preferred to maintain a high value for their currency. National government authorities rarely intervened in the foreign exchange market. National currency exchange rate determined by market forces of supply and demand. Government intervened in markets by participating in systems of managed exchanges rates, to maintain balance of trade or to give its exporters a competitive advantage in international trade. However, when a country is suffering from high unemployment or wishes to pursue a policy of export-led growth, a lower exchange rate can be seen as advantageous. By the mid-1920s many former members of the gold standard had rejoined, and while the standard did not work as successfully as it had pre-war, there was no widespread competitive devaluation. The three principal parties were Great Britain, France, and the United States. For most of the 1920s the three generally had coinciding interests; both the US and France supported Britain's efforts to raise Sterling's value against market forces. Collaboration was aided by strong personal friendships among the nations' central bankers, especially between Britain's Montagu Norman and America's Benjamin Strong until the latter's early death in 1928.

1929 Soon after the Wall Street Crash of 1929, France lost faith in Sterling as a source of value and begun selling it heavily on the markets. From Britain's perspective both France and the US were no longer playing by the rules of the gold standard. Instead of allowing gold inflows to increase their money supplies (which would have expanded those economies but reduced their trade surpluses) France and the US began sterilising the inflows, building up hoards of gold. These factors contributed to the Sterling crises of 1931; in September of that year Great Britain substantially devalued and took the pound off the gold standard. For several years after this global trade was disrupted by competitive devaluation and by retaliatory tariffs.

1930s The exact starting date of the 1930s currency war is open to debate. Currency war - countries abandoned the Gold Standard during the Great Depression, competitive devaluation currency devaluations used to stimulate national economies. unemployment pushed overseas? trading partners retaliated with devaluations - unpredictable changes in exchange rates reduced overall international trade international affairs exchange rate currency purchasing power A state wishing to devalue, or at least check the appreciation of its currency, must work within the constraints of the prevailing International monetary system. During the 1930s, countries had relatively more direct control over their exchange rates through the actions of their central banks. During the Great Depression of the 1930s, most countries abandoned the gold standard. With widespread high unemployment, devaluations became common, a policy that has frequently been described as "beggar thy neighbour" were widely adopted by major economies, However, because the effects of a devaluation would soon be offset by a corresponding devaluation and in many cases retaliatory tariffs or other barriers by trading partners, few nations would gain an enduring advantage. Beggar thy neighbour is an economic policy through which one country attempts to remedy its economic problems by means that tend to worsen the economic problems of other countries. Alan Deardorff has analysed beggar-thy-neighbour policies as an instance of the prisoner's dilemma known from game theory: each country individually has an incentive to follow such a policy, thereby making everyone (including themselves) worse off.

1936 The currency war of the 1930s is generally considered to have ended with the Tripartite monetary agreement of 1936.

1930s Comparison with the Great Depression currency war

Migrant Mother by Dorothea Lange (1936). This portrait of a 32-year-old farm-worker with seven children became an iconic photograph symbolising defiance in the face of adversity. A currency war contributed to the worldwide economic hardship of the 1930s Great Depression.

Both the 1930s episode and the outbreak of competitive devaluation that began in 2009 occurred during global economic downturns. An important difference with the 2010s period is that international traders are much better able to hedge their exposures to exchange rate volatility due to more sophisticated financial markets. A second difference is that during the later period devaluations have invariably been effected by nations expanding their money supplies—either by creating money to buy foreign currency, in the case of direct interventions, or by creating money to inject into their domestic economies, with quantitative easing. If all nations try to devalue at once, the net effect on exchange rates could cancel out leaving them largely unchanged, but the expansionary effect of the interventions would remain. So while there has been no collaborative intent, some economists such as Berkeley's Barry Eichengreen and Goldman Sachs's Dominic Wilson have suggested the net effect will be similar to semi-coordinated monetary expansion which will help the global economy. James Zhan of the United Nations Conference on Trade and Development (UNCTAD) however warned in October 2010 that the fluctuations in exchange rates were already causing corporations to scale back their international investments.

Comparing the situation in 2010 with the currency war of the 1930s, Ambrose Evans-Pritchard of the Daily Telegraph suggested a new currency war may be beneficial for countries suffering from trade deficits, noting that in the 1930s it was the big surplus countries that were severely impacted once competitive devaluation began. He also suggested that overly confrontational tactics may backfire on the US as they may damage the status of the dollar as a global reserve currency.

Ben Bernanke, chairman of the US Federal Reserve, also drew a comparison with competitive devaluation in the inter-war period, referring to the sterilisation of gold inflows by France and America which helped them sustain large trade surpluses, but which also caused deflationary pressure on their trading partners, contributing to the Great Depression. Bernanke has stated the example of the 1930s implies that the "pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account."

In February 2013, Gavyn Davies for The Financial Times emphasized that a key difference between the 1930s and the 21st century outbreaks is that in the thirties some of the retaliations between countries were carried out not by devaluations, but by increases in import tariffs, which tend to be much more disruptive to international trade.

1930s - 1950s Currency wars refer Japan vs China preferred tenders in parts of Asia in the years leading up to Second Sino-Japanese War.

In 1944 in Bretton Woods, New Hampshire, representatives from 44 nations met to develop a new international monetary system that came to be known as the Bretton Woods system. Conference members had hoped that this new system would “ensure exchange rate stability, prevent competitive devaluations, and promote economic growth." It was not until 1958 that the Bretton Woods System became fully operational.

1947 With the Marshall Plan, Japan and Europe were rebuilding from the war, and countries outside the US wanted dollars to spend on American goods — cars, steel, machinery, etc. Because the U.S. owned over half the world's official gold reserves — 574 million ounces at the end of World War II — the system appeared secure.

1950s A third method is for authorities simply to talk down the value of their currency by hinting at future action to discourage speculators from betting on a future rise, though sometimes this has little discernible effect. Finally, a central bank can effect a devaluation by lowering its base rate of interest; however this sometimes has limited effect, and, since the end of World War II, most central banks have set their base rate according to the needs of their domestic economy.

1950s In Cold War-era United States, under the Bretton Woods system of fixed exchange rates, currency intervention was used to help maintain the exchange rate within prescribed margins and was considered to be essential to a central bank’s toolkit.

1960s From 1950 to 1969, as Germany and Japan recovered, the US share of the world's economic output dropped significantly, from 35% to 27%. Furthermore, a negative balance of payments, growing public debt incurred by the Vietnam War, and monetary inflation by the Federal Reserve caused the dollar to become increasingly overvalued in the 1960s.

1965 In February 1965 President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate. In France, the Bretton Woods System was called "America's exorbitant privilege" as it resulted in an "asymmetric financial system" where non-US citizens "see themselves supporting American living standards and subsidizing American multinationals". As American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one".

1968 The dissolution of the Bretton Woods system between 1968 and 1973 was largely due to President Richard Nixon’s “temporary” suspension of the dollar’s convertibility to gold in 1971, after the dollar struggled throughout the late 1960s in light of large increases in the price of gold. The Nixon shock was a series of economic measures undertaken by United States President Richard Nixon in 1971, the most significant of which was the unilateral cancellation of the direct convertibility of the United States dollar to gold.

1971 On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar, in an effort to protect the dollar against "foreign price-gougers". By 1971, the money supply had increased by 10%. In May 1971, West Germany left the Bretton Woods system, unwilling to revalue the Deutsche Mark. In the following three months, this move strengthened its economy. Simultaneously, the dollar dropped 7.5% against the Deutsche Mark. Other nations began to demand redemption of their dollars for gold. Switzerland redeemed $50 million in July. France acquired $191 million in gold. On August 9, 1971, as the dollar dropped in value against European currencies, Switzerland left the Bretton Woods system. The pressure began to intensify on the United States to leave Bretton Woods.Devaluation, with its adverse consequences, has historically rarely been a preferred strategy. According to economist Richard N. Cooper, writing in 1971, a substantial devaluation is one of the most "traumatic" policies a government can adopt – it almost always resulted in cries of outrage and calls for the government to be replaced. Devaluation can lead to a reduction in citizens' standard of living as their purchasing power is reduced both when they buy imports and when they travel abroad. It also can add to inflationary pressure. From the end of World War II until about 1971, the Bretton Woods system of semi-fixed exchange rates meant that competitive devaluation was not an option, which was one of the design objectives of the systems' architects. Additionally, global growth was generally very high in this period, so there was little incentive for currency war even if it had been possible. The American public felt the government was rescuing them from price gougers and from a foreign-caused exchange crisis. Politically, Nixon's actions were a great success. The Dow rose 33 points the next day, its biggest daily gain ever at that point, and the New York Times editorial read, "We unhesitatingly applaud the boldness with which the President has moved." The Nixon Shock has been widely considered to be a political success, but an economic mixed bag in bringing on the stagflation of the 1970s and leading to the instability of floating currencies. The dollar plunged by a third during the '70s. According to the World Trade Review's report "The Nixon Shock After Forty Years: The Import Surcharge Revisited", Douglas Irwin reports that for several months, U.S officials could not get other countries to agree to a formal revaluation of their currencies. The German mark appreciated significantly after it was allowed to float in May 1971.

1973 By 1973, the Bretton Woods system was replaced de facto by a regime based on freely floating fiat currencies that remains in place to the present day. An attempt to revive the fixed exchange rates failed, and by March 1973 the major currencies began to float against each other. Following the collapse of the Bretton Woods system in the early 1970s, markets substantially increased in influence, with market forces largely setting the exchange rates for an increasing number of countries. However, a state's central bank can still intervene in the markets to effect a devaluation – if it sells its own currency to buy other currencies. In practice this chiefly means purchasing assets such as government bonds that are denominated in other currencies. then this will cause the value of its own currency to fall – a practice common with states that have a managed exchange rate regime.

1970s - 1980s Since the end of the traditional Bretton Woods system, IMF members have been free to choose any form of exchange arrangement they wish (except pegging their currency to gold), such as: allowing the currency to float freely, pegging it to another currency or a basket of currencies, adopting the currency of another country, participating in a currency bloc, or forming part of a monetary union. The end of the traditional Bretton Wood system in the early 1970s and the move to managed currencies led to a large scale increase in currency intervention throughout the 1970s and 80’s.

1980s Some Asian economies devalued their currencies from as early as the 1980s, but it was only after 1999 that it became common, with the developing world as a whole running a CA surplus instead of a deficit from 1999. During the mid-1980s the United States did desire to devalue significantly, but were able to secure the cooperation of other major economies with the Plaza Accord.

early 1980s From the early 1980s the International Monetary Fund (IMF) has proposed devaluation as a potential solution for developing nations that are consistently spending more on imports than they earn on exports. A lower value for the home currency will raise the price for imports while making exports cheaper. This tends to encourage more domestic production, which raises employment and gross domestic product (GDP) – though the effect may not be immediate due to the Marshall–Lerner condition. Devaluation can be seen as an attractive solution to unemployment when other options, like increased public spending, are ruled out due to high public debt, or when a country has a balance of payments deficit which a devaluation would help correct. A reason for preferring devaluation common among emerging economies is that maintaining a relatively low exchange rate helps them build up foreign exchange reserves, which can protect against future financial crises.

1990s As free market influences approached their zenith during the 1990s, advanced economies and increasingly transition and even emerging economies moved to the view that it was best to leave the running of their economies to the markets and not to intervene even to correct a substantial current account deficit. Though developing economies were encouraged to pursue export led growth – see Washington Consensus.

1996 In 1996, economist Paul Krugman (Nobel Prize in Economic Sciences, 2008) summarized the post-Nixon Shock era as follows:

The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond to actual or threatened recessions by pumping in money. To take only one example, that flexibility is the reason the stock market crash of 1987—which started out every bit as frightening as that of 1929—did not cause a slump in the real economy. While a freely floating national money has advantages, however, it also has risks. For one thing, it can create uncertainties for international traders and investors. Over the past five years, the dollar has been worth as much as 120 yen and as little as 80. The costs of this volatility are hard to measure (partly because sophisticated financial markets allow businesses to hedge much of that risk), but they must be significant. Furthermore, a system that leaves monetary managers free to do good also leaves them free to be irresponsible—and, in some countries, they have been quick to take the opportunity.

1996 In the analysis of the Great Depression 1929-1939 Dietmar Rothermund used the term beggar thy neighbour referring to how in which countries purportedly compete to export unemployment. However, because the effects of a devaluation would soon be offset by a corresponding devaluation and in many cases retaliatory tariffs or other barriers by trading partners, few nations would gain an enduring advantage. Beggar thy neighbour is an economic policy through which one country attempts to remedy its economic problems by means that tend to worsen the economic problems of other countries. Alan Deardorff analysed beggar-thy-neighbour policies as an instance of the prisoner's dilemma known from game theory: each country individually has an incentive to follow such a policy, thereby making everyone (including themselves) worse off.

1997 During the 1997 Asian crisis several Asian economies ran critically low on foreign reserves, leaving them forced to accept harsh terms from the IMF, and often to accept low prices for the forced sale of their assets. This shattered faith in free market thinking among emerging economies. On several occasions countries were desperately attempting not to cause a devaluation but to prevent one. So states were striving not against other countries but against market forces that were exerting undesirable downwards pressure on their currencies. Examples include Great Britain during Black Wednesday and various tiger economies during the Asian crises of 1997.

From 1989 to 2003, Japan was suffering from a long deflationary period. After experiencing economic boom, the Japanese economy slowly declined in the early 1990s and entered a deflationary spiral in 1998. Within this period, Japanese output activities were stagnating; the deflation, in the sense of a negative inflation rate, was getting continuing to fall, and the unemployment rate was increasing. Simultaneously, confidence in the financial sector waned, and several banks failed. During the period, the Bank of Japan, having become legally independent in March 1998, aimed at stimulating the economy by ending deflation and stabilizing the financial system. The "availability and effectiveness of traditional policy instruments was severely constrained as the policy interest rate was already virtually at zero, and the nominal interest rate could not become negative (the zero bound problem)."

2000 From about 2000 they generally began intervening to keep the value of their currencies low. This enhanced their ability to pursue export led growth strategies while at the same time building up foreign reserves so they would be better protected against further crises. No currency war resulted because on the whole advanced economies accepted this strategy—in the short term it had some benefits for their citizens, who could buy cheap imports and thus enjoy a higher material standard of living.

2002 Devaluation can make interest payments on international debt more expensive if those debts are denominated in a foreign currency, and it can discourage foreign investors. At least until the 21st century, a strong currency was commonly seen as a mark of prestige, while devaluation was associated with weak governments.

2003 Economists such as Michael P. Dooley, Peter M. Garber, and David Folkerts-Landau described the new economic relationship between emerging economies and the US as Bretton Woods II.

2005 With the global economy doing well, China abandoned its dollar peg in 2005, allowing a substantial appreciation of the Yuan up to 2007, while still increasing its exports. The dollar peg was later re-established as the financial crises began to reduce China's export orders. This is not say there was no popular concern; by 2005 for example a chorus of US executives along with trade union and mid-ranking government officials had been speaking out about what they perceived to be unfair trade practices by China.

2007 The current account deficit of the US grew substantially, but until about 2007, the consensus view among free market economists and policy makers like Alan Greenspan, then Chairman of the Federal Reserve, and Paul O'Neill, US Treasury secretary, was that the deficit was not a major reason for worry.

1999 - 2007 The term beggar they neighbour was in widespread use, in such publications as The Economist and BBC News.

2009 Less directly, quantitative easing (common in 2009 and 2010), tends to lead to a fall in the value of the currency even if the central bank does not directly buy any foreign assets.

2009 As the financial crisis of 2007–08 hit Switzerland, the Swiss franc appreciated, “owing to a flight to safety and to the repayment of Swiss franc liabilities funding carry trades in high yielding currencies”. On March 12, 2009, the Swiss National Bank (SNB) announced that it intended to buy foreign exchange to prevent the Swiss franc from further appreciation. Affected by the SNB purchase of Euros and U.S. dollars, Swiss franc weakened from 1.48 against the euro to 1.52 in a single day. At the end of 2009, the currency risk seemed to be solved; the SNB changed its attitude to preventing substantial appreciation. Unfortunately, the Swiss franc began to appreciate again. Thus, the SNB stepped in one more time and intervened at a rate of more than CHF 30 billion per month. By the end of June 17, 2010, when the SNB announced the end of intervening, it had purchased an equivalent of $179 billion of Euros and U.S. dollars, amounting to 33% of Swiss GDP. Furthermore, in September 2011, the SNB influenced the foreign exchange market again, and set a minimum exchange rate target of SFr 1.2 to the Euro.

2009 - 2011

As the world's leading Reserve currency, the US dollar was central to the 2010–2011 outbreak of currency war.

Currency War of 2009–2011 By 2009 some of the conditions required for a currency war had returned, with a severe economic downturn seeing global trade in that year decline by about 12%. There was a widespread concern among advanced economies about the size of their deficits; they increasingly joined emerging economies in viewing export led growth as their ideal strategy. In March 2009, even before international co-operation reached its peak with the 2009 G-20 London Summit , economist Ted Truman became one of the first to warn of the dangers of competitive devaluation. He also coined the phrase competitive non-appreciation.

Brazilian Finance Minister Guido Mantega, who made headlines when he raised the alarm about a global currency war in September 2010.

September 2010 - 2011 On 27 September 2010, Brazilian Finance Minister Guido Mantega announced that the world is "in the midst of an international currency war." and the terms beggar thy neighbour was again in common usage. (Transcending the dilemma of beggar-thy-neighbor policies involves realizing that trade is not a zero-sum game, but rather the comparative advantage of each economy offers real gains from trade for all.) Numerous financial journalists agreed with Mantega's view, such as the Financial Times Alan Beattie and The Telegraph's Ambrose Evans-Pritchard. Journalists linked Mantega's announcement to recent interventions by various countries seeking to devalue their exchange rate including China, Japan, Colombia, Israel and Switzerland.2010 Quantitative easing (QE) central bank mitigate recession by increasing the money supply for its domestic economy-temporarily printing money and injecting it into the domestic economy via open market operations and perhaps destroying the paper money later - competitive devaluation 2010 - direct government intervention, capital controls - quantitative easing - rhetorical conflict between the United States and China over the valuation of the yuan.

2010 Most economists, notably Paul Krugman, argue that Chinese currency devaluation helps China by boosting its exports, and hurts the United States by widening its trade deficit. In other words, China intentionally devalues its currency in order to keep its exports cheap, thus facilitating countries like the United States to buy more Chinese goods. Krugman has suggested that the United States should impose tariffs on Chinese goods as a way of undermining the efforts of the Chinese to make their goods cheaper in relativity to the U.S. dollars. Krugman stated,

"The more depreciated China’s exchange rate — the higher the price of the dollar in yuan* — the more dollars China earns from exports, and the fewer dollars it spends on imports. (Capital flows complicate the story a bit, but don’t change it in any fundamental way). By keeping its current artificially weak — a higher price of dollars in terms of yuan — China generates a dollar surplus; this means that the Chinese government has to buy up the excess dollars."

— Paul Krugman 2010

January - February 2013 Japan vs EU G7 and G20 avoid competitive devaluation

2015 European Central Bank - quantitative easing in January 2015 discussion about currency war.

If a country's authorities wish to devalue or prevent appreciation against market forces exerting upwards pressure on the currency, and retain control of interest rates, as is usually the case, they will need capital controls in place—due to conditions that arise from the impossible trinity trilemma.

Quantitative easing was widely used as a response to the financial crises that began in 2007, especially by the United States and the United Kingdom, and, to a lesser extent, the Eurozone. The Bank of Japan was the first central bank to claim to have used such a policy.

2010 Although the U.S. administration has denied that devaluing their currency was part of their objectives for implementing quantitative easing, the practice can act to devalue a country's currency in two indirect ways. Firstly, it can encourage speculators to bet that the currency will decline in value. Secondly, the large increase in the domestic money supply will lower domestic interest rates, often they will become much lower than interest rates in countries not practising quantitative easing. This creates the conditions for a carry trade, where market participants can engage in a form of arbitrage, borrowing in the currency of the country practising quantitative easing, and lending in a country with a relatively high rate of interest. Because they are effectively selling the currency being used for quantitative easing on the international markets, this can increase the supply of the currency and hence push down its value. By October 2010 expectations in the markets were high that the United States, UK, and Japan would soon embark on a second round of QE, with the prospects for the Eurozone to join them less certain.

27 September 2010 For much of 2009 and 2010, China has been under pressure from the US to allow the yuan to appreciate. Between June and October 2010, China allowed a 2% appreciation, but there are concerns from Western observers that China only relaxes its intervention when under heavy pressure. The fixed peg was not abandoned until just before the June G20 meeting, after which the yuan appreciated by about 1%, only to devalue slowly again, until further US pressure in September when it again appreciated relatively steeply, just prior to the September US Congressional hearings to discuss measures to force a revaluation.

5 October 2010 Martin Wolf, an economics leader writer with the Financial Times, suggested there may be advantages in western economies taking a more confrontational approach against China, which in recent years had been by far the biggest practitioner of competitive devaluation. Though he advised that rather than using protectionist measures which may spark a trade war, a better tactic would be to use targeted capital controls against China to prevent them buying foreign assets in order to further devalue the yuan, as previously suggested by Daniel Gros, Director of the Centre for European Policy Studies.

11 October 2010 Reuters suggested that both China and the United States were "winning" the currency war, holding down their currencies while pushing up the value of the Euro, the Yen, and the currencies of many emerging economies.

17 October 2010 Considerable attention was focused on the US, due to its quantitative easing programmes, and on China.

19 October 2010 A contrasting view was published on 19 October, with a paper from Chinese economist Yiping Huang arguing that the US did not win the last "currency war" with Japan, and has even less of a chance against China; but should focus instead on broader "structural adjustments" at the November 2010 G-20 Seoul summit.

7 November 2010 Some leading figures from the critical countries, such as Zhou Xiaochuan, governor of the People's Bank of China, have said the QE2 is understandable given the challenges facing the United States. Wang Jun, the Chinese Vice Finance Minister suggested QE2 could "help the revival of the global economy tremendously". President Barack Obama has defended QE2, saying it would help the U.S. economy to grow, which would be "good for the world as a whole". Japan also launched a second round of quantitative easing though to a lesser extent than the United States; Britain and the Eurozone did not launch an additional QE in 2010.

8 November 2010 In early November 2010 the United States launched QE2, the second round of quantitative easing, which had been expected. The Federal Reserve made an additional $600 billion available for the purchase of financial assets. This prompted widespread criticism from China, Germany, and Brazil that the United States was using QE2 to try to devalue its currency without consideration to the effect the resulting capital inflows might have on emerging economies.

While some of the conditions to allow a currency war were in place at various points throughout this period, countries generally had contrasting priorities and at no point were there enough states simultaneously wanting to devalue for a currency war to break out. Though a few commentators have asserted the Nixon shock was in part an act of currency war, and also the pressure exerted by the United States in the months leading up to the Plaza accords.

12 November 2010 Discussion over currency war and imbalances dominated the 2010 G-20 Seoul summit, but little progress was made in resolving the issue.

21 April 2011 An individual currency devaluation has to involve a corresponding rise in value for at least one other currency. The corresponding rise will generally be spread across all other currencies. Though not necessarily evenly: in the late 20th and early 21st century countries would often devalue specifically against the dollar, so while the devaluing currency would lower its exchange rate against all currencies, a corresponding rise against the global average might be confined largely just to the dollar and any currencies currently governed by a dollar peg. A further complication is that the dollar is often affected by such huge daily flows on the foreign exchange that the rise caused by a small devaluation may be offset by other transactions. Unless the devaluing country has a huge economy and is substantially devaluing, the offsetting rise for any individual currency will tend to be small or even negligible. In normal times other countries are often content to accept a small rise in the value of their own currency or at worst be indifferent to it. However, if much of the world is suffering from a recession, from low growth or are pursuing strategies which depend on a favourable balance of payments, then nations can begin competing with each other to devalue. In such conditions, once a small number of countries begin intervening this can trigger corresponding interventions from others as they strive to prevent further deterioration in their export competitiveness.

28 February 2011 In the first half of 2011 analysts and the financial press widely reported that the currency war had ended or at least entered a lull, though speaking in July 2011 Guido Mantega told the Financial Times that the conflict was still ongoing.

21 November 2011 Other analysts such as Goldman Sach's Jim O'Neill asserted that fears of a currency war were exaggerated. In September, senior policy makers such as Dominique Strauss-Kahn, then managing director of the IMF, and Tim Geithner, US Secretary of the Treasury, were reported as saying the chances of a genuine currency war breaking out were low; however by early October, Strauss-Kahn was warning that the risk of a currency war was real. He also suggested the IMF could help resolve the trade imbalances which could be the underlying casus belli for conflicts over currency valuations. Mr Strauss-Kahn said that using currencies as weapons "is not a solution [and] it can even lead to a very bad situation. There's no domestic solution to a global problem." As investor confidence in the global economic outlook fell in early August, Bloomberg suggested the currency war had entered a new phase. This followed renewed talk of a possible third round of quantitative easing by the US and interventions over the first three days of August by Switzerland and Japan to push down the value of their currencies.

2011 September 21 In September, as part of its opening speech for the 66th United Nations Debate, and also in an article for the Financial Times, Brazilian president Dilma Rousseff called for the currency war to be ended by increased use of floating currencies and greater cooperation and solidarity among major economies, with exchange rate policies set for the good of all rather than having individual nations striving to gain an advantage for themselves.

2012 March In March 2012, Rousseff said Brazil was still experiencing undesirable upwards pressure on its currency, with its Finance Minister Guido Mantega saying his country will no longer "play the fool" and allow others to get away with competitive devaluation, announcing new measures aimed at limiting further appreciation for the Real. By June however, the Real had fallen substantially from its peak against the Dollar, and Mantega had been able to begin relaxing his anti-appreciation measures.

2012 August Entrepreneur and Forbes contributor Louis Woodhill, argued that one of the reasons Mitt Romney lost the 2012 election was because the US electorate did not "buy monetary mercantilism" when Romney ran ads accusing China of "currency manipulation." Is the term "currency manipulation" a dog whistle phrase? The Peterson Institute for International Economics argued that there are four groups that stand out as frequent currency manipulators: Longstanding advanced and developed economies, such as Japan and Switzerland, newly industrialized economies such as Singapore, developing Asian economies such as China, and oil exporters, such as Russia. As of the end of 2012, China’s foreign exchange reserve holds roughly $3.3 trillion, making it the highest foreign exchange reserve in the world. Roughly 60% of this reserve is composed of US government bonds and debentures.

2012 October During the 2012 Presidential election both President Obama and Romney complained about "Chinese economic misbehaviour." According to The Economist however, the yuan in October 2012 was "close to fair value," net exports had been a "drag on Chinese growth since 2010 and in 2012 China faced "substantial capital outflows."

2013 In mid January 2013, Japan's central bank signaled the intention to launch an open ended bond buying programme which would likely devalue the yen. This resulted in short lived but intense period of alarm about the risk of a possible fresh round of currency war. In 2013, Japanese Finance Minister Taro Aso stated that Japan planned to use its foreign exchange reserves to buy bonds issued by the European Stability Mechanism and euro-area sovereigns, in order to weaken the yen. The U.S. criticized Japan for undertaking unilateral sales of the yen in 2011, after Group of Seven economies jointly intervened to weaken the currency in the aftermath of the record earthquake and tsunami that year.As of 2013, Japan holds $1.27 trillion in foreign reserves according to finance ministry data.

Numerous senior central bankers and finance ministers issued public warnings, the first being Alexei Ulyukayev, the first deputy chairman at Russia's central bank. He was later joined by many others including Park Jae-wan, the finance minister for South Korea, and by Jens Weidmann, president of the Bundesbank. Weidmann held the view that interventions during the 2009–11 period were not intense enough to count as competitive devaluation, but that a genuine currency war is now a real possibility. Japan's economy minister Akira Amari has said that the Bank of Japan's bond buying programme is intended to combat deflation, and not to weaken the yen.

In early February, ECB president Mario Draghi agreed that expansionary monetary policy like QE have not been undertaken to deliberately cause devaluation. Draghi's statement did however hint that the ECB may take action if the Euro continues to appreciate, and this saw the value of the European currency fall considerably. A mid February statement from the G7 affirmed the advanced economies commitment to avoid currency war. It was initially read by the markets as an endorsement of Japan's actions, though later clarification suggested the US would like Japan to tone down some of its language, specifically by not linking policies like QE to an expressed desire to devalue the Yen. Most commentators have asserted that if a new round of competitive devaluation occurs it would be harmful for the global economy. However some analysts have stated that Japan's planned actions could be in the long term interests of the rest of the world; just as he did for the 2010–11 incident, economist Barry Eichengreen has suggested that even if many other countries start intervening against their currencies it could boost growth world-wide, as the effects would be similar to semi-coordinated global monetary expansion. Other analysts have expressed skepticism about the risk of a war breaking out, with Marc Chandler, chief currency strategist at Brown Brothers Harriman, advising that: "A real currency war remains a remote possibility."

On 15 February, a statement issued from the G20 meeting of finance ministers and central bank governors in Moscow affirmed that Japan would not face high level international criticism for its planned monetary policy. In a remark endorsed by US Fed chairman Ben Bernanke, the IMF's managing director Christine Lagarde said that recent concerns about a possible currency war had been "overblown". Paul Krugman has echoed Eichengreen's view that central bank's unconventional monetary policy is best understood as a shared concern to boost growth, not as currency war. Goldman Sachs strategist Kamakshya Trivedi has suggested that rising stock markets imply that market players generally agree that central bank's actions are best understood as monetary easing and not as competitive devaluation. Other analysts have however continued to assert that ongoing tensions over currency valuation remain, with currency war and even trade war still a significant risk. Central bank officials ranging from New Zealand and Switzerland to China have made fresh statements about possible further interventions against their currencies.

Analyses has been published by currency strategists at RBS, scoring countries on their potential to undertake intervention, measuring their relative intention to weaken their currency and their capacity to do so. Ratings are based on the openness of a country's economy, export growth and real effective exchange rate (REER) valuation, as well as the scope a country has to weaken its currency without damaging its economy. As of January 2013, Indonesia, Thailand, Malaysia, Chile and Sweden are the most willing and able to intervene, while the UK and New Zealand are among the least.

From March 2013, concerns over further currency war diminished, though in November several journalists and analysts warned of a possible fresh outbreak. The likely principal source of tension appeared to shift once again, this time not being the U.S. versus China or the Eurozone versus Japan, but the U.S. versus Germany. In late October U.S. treasury officials had criticized Germany for running an excessively large current account surplus, thus acting as a drag on the global economy.

2014 Since September 2014, several journalists, commentators and financial sector insiders have again raised the prospect of further currency war. This time, rather than being intended as a means to boost competitiveness, some states, especially Japan and the Eurozone, may be motivated to devalue their currencies as a means to counter the threat of deflation. ECB President Mario Draghi has however denied any intent to engage in competitive devaluation.

15 January 2015 On January 15, 2015, the Swiss National Bank (SNB) suddenly announced that it would no longer hold the Swiss Franc at the fixed exchange rate with the euro it had set in 2011. The franc soared in response; the euro fell roughly 40 percent in value in relation to the franc, falling as low as 0.85 francs (from the original 1.2 francs).

As investors flocked to the franc during the financial crisis, they dramatically pushed up its value. An expensive franc may have large adverse effects on the Swiss economy; the Swiss economy is heavily reliant on selling things abroad. Exports of goods and services are worth over 70% of Swiss GDP. In order to maintain price stability and lower the franc’s value, the SNB created new francs and used them to buy euros. Increasing the supply of francs relative to euros on foreign-exchange markets caused the franc’s value to fall (ensuring the euro was worth 1.2 francs). This policy resulted in the SNB amassing roughly $480 billion-worth of foreign currency, a sum equal to about 70% of Swiss GDP.

The Economist asserts that the SNB dropped the cap for the following reasons: first, rising criticisms among Swiss citizens regarding the large build-up of foreign reserves. Fears of runaway inflation underlie these criticisms, despite inflation of the franc being too low, according to the SNB. Second, in response to the European Central Bank's decision to initiate a quantitative easing program to combat euro deflation. The consequent devaluation of the euro would require the SNB to further devalue the franc had they decided to maintain the fixed exchange rate. Third, due to recent euro depreciation in 2014, the franc lost roughly 12% of its value against the USD and 10% against the rupee (exported goods and services to the U.S. and India account for roughly 20% Swiss exports).

Following the SNB's announcement, the Swiss stock market sharply declined; due to a stronger franc, Swiss companies have a more difficult time selling goods and services to neighboring European citizens.

January 2015 A €60bn per month quantitative easing programme was launched in January 2015 by the European Central Bank. While lowering the value of the Euro was not part of the programme's official objectives, there was much speculation that the new Q.E. represents an escalation of currency war, especially from analysts working in the FX markets. David Woo for example, a managing director at Bank of America Merrill Lynch, stated there was a "growing consensus" among market participants that states are indeed engaging in a stealthy currency war. A Financial Times editorial however claimed that rhetoric about currency war was once again misguided.

August 2015 In August 2015, China devalued the yuan by just under 3%, partially due to a weakening export figures of -8.3% in the previous month. The drop in export is caused by the loss of competitiveness against other major export countries including Japan and Germany, where the currency had been drastically devalued during the previous quantitative easing operations. It sparked a new round of devaluation among Asian currencies, including the Vietnam dong and the Kazakhstan tenge.

By 2015 The American dollar was generally the primary target for currency managers. The dollar is the global trading system’s premier reserve currency, meaning dollars are freely traded and confidently accepted by international investors.

November 2015 There was a debate on whether or not China manipulates its currency for its own benefit in trade with Donald Trump reiterating Mitt Romney 2012 arguments and many others disagreed. Cato Institute trade policy studies fellow Daniel Pearson, pointed out that "China isn’t actually a part of the Trans-Pacific Partnership." (TPP)

""Some people are all wrapped up in this issue of currency manipulation. I don’t think that’s applicable to the Chinese. It was never clear to me that China artificially lowered the value of its currency to gain an export advantage (in the past)...[The only way China could benefit from the TPP is if it experiences the "spillover benefits" of increased trading between the 12 countries involved in the TPP.] "There is some possibility that there will be trade diversion away from China and more trade between other TPP member countries. That’s a potential negative. However, that may be entirely offset by the greater level of economic activity that we should expect to see in the TPP member countries."

— Daniel Pearson, Cato Institute cited in Youngman 2015

Others include the National Taxpayers Union Policy and Government Affairs Manager Clark Packard, entrepreneur and Forbes contributor Louis Woodhill, Henry Kaufman Professor of Financial Institutions at Columbia University Charles W. Calomiris, economist Ed Dolan, William L. Clayton Professor of International Economic Affairs at the Fletcher School, Tufts University Michael W. Klein, Harvard University Kennedy School of Government Professor Jeffrey Frankel, Bloomberg columnist William Pesek, Quartz reporter Gwynn Guilford, The Wall Street Journal Digital Network Editor-In-Chief Randall W. Forsyth, United Courier Services, and China Learning Curve,

2015 The view that China obviously manipulates its currency for its own benefit in trade has been criticized by National Taxpayers Union Policy and Government Affairs Manager Clark Packard,

"As National Taxpayers Union has written, “currency manipulation is not a panacea in global commerce. If a country devalues its currency to encourage exports, it raises the price of items it imports from foreign countries. At the same time, forcing countries to raise the value of their currency could raise the prices of imported goods that families and businesses in the United States rely on.”

— National Taxpayers Union 2015

2015 There is a "side agreement in the trade deal -- separate from the 6,000 page main text -- that says the 12 countries involved agree not to artificially deflate the value of their currencies. However, there is no enforceability provision -- meaning the clause is more of an honor code than a strict regulation."

"There aren't many economists who would be comfortable with an enforceable currency manipulation clause. A binding currency provision would tie policy makers' hands at precisely the wrong time: when a central bank-- like the U.S. Federal Reserve-- needs to respond to a downturn in the local economy."

— Emily J. Blanchard, associate professor at the Tuck School of Business at Dartmouth College

8 January 2016 The Wall Street Journal's Matthew Slaughter disagreed with Donald Trump's claim that "the wanton manipulation of China’s currency" is "robbing Americans of billions of dollars of capital and millions of jobs." According to Slaughter,

"Currency devaluation or revaluation is a common exercise of sovereign monetary policy. During the post-World War II Bretton Woods regime, dozens of countries pegged their currencies to the dollar while, in turn, the Fed pegged $35 to an ounce of gold... If Zhou Xiaochuan, governor of the People’s Bank of China, is a currency manipulator, then Janet Yellen is an interest-rate manipulator."

— Matthew Slaughter Wall Street Journal

28 March 2016 According to Robert E. Scott in response to the question "Are Trade Agreements Good for Americans?" they "increase trade deficits, which have led to job loss,"

"It is time for a reset in U.S. trade and international economic relations. We must put an end to unfair trade practices such as currency manipulation, which is the single largest cause of U.S. trade deficits and trade-related job losses. The United States needs to develop a results-based approach to trade negotiations that is designed to rebalance global trade and ensure that the benefits of trade are broadly shared, and not funneled to those with the most wealth and power in our society."

— Robert E. Scott "Are Trade Agreements Good for Americans?" in The Hill

29 March 2016 The United States lost 5 million jobs largely because cheaper Chinese exports flooded the market. According to Douglas Irwin, an economist at Dartmouth College, partly through "currency manipulation" between 2000 and 2011, "imports from China grew to equal 2.6 percent of American economic output, up from around 1 percent." This created an "unprecedented shock" that was "much larger than that from the increase in Japanese imports in the 1980s or Mexican imports in the 1990s."

During the housing boom in the United States the rise in construction jobs offset the loss of jobs from manufacturers unable to compete with the China price. During the mortgage crisis the construction jobs were lost too.

2015-2016 The United States added 600,000 factory jobs since 2001. China stopped suppressing its currency and is now "trying to prop up the value." Yet Trump insists " “You look at those empty factories all over the place, and nobody hits that message better than me."

Potential portals

trade bloc

Potential categories

Category:Currency Category:History of international trade Category:International economics Category:Macroeconomics Category:Metallism Category:Monetary hegemony Category:Trade wars

See also

• Force multiplication
• Trade war
• Cryptocurrency
• Paradox of competition
• Race to the bottom
• Currency war
• Protectionism
• Mercantilism
• Currency intervention
• Internal devaluation
• International trade
• Balance of trade
• Choum
• competitive devaluation
• Central Bank
• Foreign exchange market
• Open market operation
• Sterilization (economics)
• Quantitative easing (QE) central bank recession by increasing the money supply for its domestic economy-temporarily printing money and injecting it into the domestic economy via open market operations and perhaps destroying the paper money later.