From currency warfare to lasting peace
Barry Eichengreen 30 September 2010
The "international currency war" mentioned by Brazil's finance minister poses massive dangers for the world trade and financial systems. This column by one of the world's most respected international economists argues that there is a better way. The G3 should engage in quantitative easing so they all can export more to each other. For the emerging markets, the danger lies in inflation, asset bubbles, and trade retaliation. To shield their key manufacturing sectors, they should encourage the domestic demand for manufactures.
If the financial press is to be believed, the world is on the verge of a currency war. Central bankers have pulled out their bazookas in a desperate, take-no-prisoners effort to weaken their currencies.
Currency wars, quantiative easing