Currency wars latest threat to global financial system

A global currency war is threatening to break out as more nations manipulate their currencies in hopes of spurring export-driven economic growth. A U.S. led international effort has been imploring the Chinese government to desist from holding the value of the yuan artificially low. China’s currency manipulation is motivating other nations to drive down the value of their currencies. Concerned policymakers call currency wars a risk to global economic recovery and are calling for a spirit of international cooperation.

Currency wars – nobody wins

In eight months, the against the euro is now at a high in competition with the U.S. dollar. Also, the U.S. is pressuring China into raising its yuan which is part of the currency war. Evidently countries will give themselves an economic advantage with its manipulation of currency, says the BBC. This really hurts the global economy though. Unilateral action by one central bank ignites conflict in other parts of the world. The yen became weaker in Japan on purpose. This was done so the U.S. had cheaper Japanese goods. This led to a stronger dollar, which hurts a recovery depending on increasing exports and magnified the U.S. currency dispute with China.

China/U.S. currency dispute brings in Europepan>

Bringing out weapons is the plan Congress has come up with. The Associated Press reports the House has approved legislation calling for economic sanctions on China and other countries manipulating their currencies to get an edge on trade. Hoping to create positions, U.S. manufacturers want to make the dollar fall up to 40 percent against China’s yuan. It is expected that the Federal Reserve will print billions of dollars in new money in order to weaken the dollar like this. A global economy is still an issue though. Europe is mad that the Euro may rise due to that action.

Why we shouldn’t manipulate currencies

The currency wars should be better off after this weekend. The International Monetary Fund can be meeting in Washington to discuss it. David Sterman at Investing Answers has a different solution. He says that the world can change its consumption habits to change things. The global economy will function better if countries like China and Japan boost domestic consumption in order to lower trade supplies. This is what Sterman says. Exporting should be done by countries like the U.S. This would help trade deficits to be reduced. President Obama has the right plan. He wants to, within the next five years, double U.S. exports. To do that, he needs China, Japan and also the rest of the world to cooperate.

Articles cited

BBC

bbc.co.uk/news/business-11484532

CBS Denver

cbs4denver.com/wireappolitics/Tensions.over.currency.2.1951356.html

Investing Answers

investinganswers.com/a/currency-wars-why-these-four-countries-are-racing-bottom-1894