Currency war is coming?

Currency war is coming?
Sep 28, 2010 03:16
guestwar	According to FT Times, the Brazilian finance minister asserts that “there is a currency war going on follows a recent escalation of competitive intervention in the foreign exchange markets, with heavyweight powers armed with serious weaponry getting involved”. Many nations have started to intervene in foreign exchange market. This year, Japan ended its six-year abstinence from intervening in the foreign exchange markets and sold an estimated $20bn of yen. Switzerland started unilateral intervention against the Swiss franc last year for the first time since 2002 and did not sterilise it by buying back in the domestic money markets what it had sold across the foreign exchanges. In common with several East Asian countries, South Korea, host of the Group of 20 summit, has been intervening intermittently to hold down the won during the course of this year. The US won’t see this as a good sign. It is considering of assembling an international coalition of countries at the forthcoming G20 meeting to put pressure on China over its interventions to prevent the renminbi rising. Although some argue that a generalised burst of foreign exchange intervention could act as a global monetary easing, a more widespread view is that such a round of competitive devaluation is more likely to inflame international tensions. Like the Brazilian finance minister said, a currency war might happen.

Sep 28, 2010 03:16

guestwar

According to FT Times, the Brazilian finance minister asserts that “there is a currency war going on follows a recent escalation of competitive intervention in the foreign exchange markets, with heavyweight powers armed with serious weaponry getting involved”.

Many nations have started to intervene in foreign exchange market. This year, Japan ended its six-year abstinence from intervening in the foreign exchange markets and sold an estimated $20bn of yen.

Switzerland started unilateral intervention against the Swiss franc last year for the first time since 2002 and did not sterilise it by buying back in the domestic money markets what it had sold across the foreign exchanges.

In common with several East Asian countries, South Korea, host of the Group of 20 summit, has been intervening intermittently to hold down the won during the course of this year.

The US won’t see this as a good sign. It is considering of assembling an international coalition of countries at the forthcoming G20 meeting to put pressure on China over its interventions to prevent the renminbi rising.

Although some argue that a generalised burst of foreign exchange intervention could act as a global monetary easing, a more widespread view is that such a round of competitive devaluation is more likely to inflame international tensions.

Like the Brazilian finance minister said, a currency war might happen.

Oct 4, 2010 21:00

BOBERT
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Join Date: Jan 1, 2009
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The currency war is not coming. It has already well and truely arrived! Most nations are now depreciating their currency as quickly as possible to curb imports and expand exports in a futile attempt at growth. Domestic consumption growth alone is no longer sufficient to drive GDP expansion so stimulating export growth is the last resort It's a race to the bottom.

China has long used this ploy but now Japan, Germany and the US have joined in.Tangible asset values will nominally appreciate as the buying power of most currencies is intentionally and artificially diluted. Oil and gold are the standout buys. Stocks will only appreciate while profits can be maintained. That wont be long without genuine GDP growth. Dangerous times lay ahead.

Oct 6, 2010 20:05

MARRIE
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Join Date: Jan 7, 2008
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<<Domestic consumption growth alone is no longer sufficient to drive GDP expansion so stimulatreing export growth is the last resort It's a race to the bottom. >> PLUS manipulating currency depreciation EQUAL ''Inflation".

Bobert, that's why it's predicted that US economy is about to crash the second time. I hear friends who just shopped back from New York State saying US is becoming cheaper and cheaper.

Oct 7, 2010 02:58

BOBERT
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Join Date: Jan 1, 2009
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The US is becoming cheaper and cheaper but China is becming more and more expensive. If the US goes into into a double dip recession, which is hghly unlikely in the short term considering the massive quantative easing and currency depreciation, China and the rest of the world will soon follow. Regardless of that, everyone can't get rich by devaluing their currency. In the medium and long term it will be a disaster. Like I said, it's a race to the bottom.

Oct 7, 2010 19:20	#4
MARRIE Points: Join Date: Jan 7, 2008 Status: Offline	Injecting more and more bank notes into circulation or bailout and at the same time buying back paper money via treasury debt can significantly curb the inflation--the major reason for economic crash. And that's what US is doing. On the other hand, China won't pour its reserves only into US treasury any more but looking at European debt mkt and direct capital investment in tangible assets overseas like mining industry, tech industry...However, the value of RMB is to move inversely agasint other currency but we don't want to see it appreciating at fast pace coz we have too many labors (I don't think our labor quality is lower than other, we are cheap because of oversupplies of labors )even if our techology has already caught up for our products targeting the high end mkt.
MARRIE Points: Join Date: Jan 7, 2008 Status: Offline	Last edited by MARRIE: Oct 7, 2010 19:25

Oct 7, 2010 21:45	#5
BOBERT Points: Join Date: Jan 1, 2009 Status: Offline	I fail to see how creating more money curbs inflation. Just the opposite in fact. More money in circulation can only drive up prices. The value will be exactly the same, but the cost will increase due to an increased supply of money. That's exactly what inflation is.

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