This happened during the Great Depression, BTW so the practice is hardly new. And while I could give long and boring lectures on all the social damage that occurs when a nation's currency is overvalued, (yes it is true, I LIKE cheap money--so sue me) I am also quite aware of the problems that crop up whenever too many finance ministers suddenly agree with me.
Well, it seems like competitive devaluations are going to top the agenda at the next G20 meeting. No matter--the practice will not end because some international gathering wants it to happen. I mean, if the freaking Swiss are worried about their currency getting too valuable, then we can rest assured that everyone has finally seen the light. (Well, not everyone--there are still plenty of folks in USA who think that an overvalued currency is a good thing.)
World gripped by 'international currency war'
• Brazilian finance minister Guido Mantega speaks out against devaluations
• Economists fear increasing currency volatility and instability
guardian.co.uk, Tuesday 28 September 2010 09.39 BST
The world is in the midst of an "international currency war" according to Brazil's finance minister as governments force down the value of their currencies to boost their struggling economies.
The comments are the first public admission made by a senior policymaker about a practice which has become increasingly widespread since the global economic downturn.
Many countries, notably China, have been deliberately weakening their currencies by selling them on foreign exchanges or keeping interest rates artificially low to make their exports cheaper.
Economists fear that such moves are resulting in increasing currency volatility and instability. Increasing competition among individual countries to devalue also makes it harder to mount a co-ordinated policy response to the economic downturn, particularly amid fears of a renewed slowdown.
The issue is likely to be high on the agenda at the upcoming G20 meeting in November in South Korea. China has resisted pressure from the US to allow the value of its currency, the yuan, to rise. Many countries in Asia, including the host, are reluctant to raise the issue for fear of antagonising China, a major trading partner. Switzerland also began selling Swiss francs on foreign exchanges last year to weaken its currency. more