The expression «currency war» conjures up a scary 1930's image of competitive devaluations (against gold) designed to divert a larger part of globally stagnant demand to individual countries at the expense of others. Then – as today –, such fears have been exacerbated by the prospect of «trade wars» as well.
William R. White
William R. White was chief economist of the Bank for International Settlements (BIS) in Basel from 1995 until his retirement in 2008. He was one of the few who had warned of the dangers of a global financial crisis before 2008. From 2009 to 2018 he was Chairman of the Economic and Development Review Committee of the OECD in Paris. He is currently a Senior Fellow at C.D. Howe Institute in Toronto. White began his career in 1969 as an economist in the service of the Bank of England and has fifty years of experience in monetary policy. He has published widely on topics related to monetary and financial stability. He lives in Toronto, Canada.
However, the currency problems we have faced in recent decades have been different from those in the 1930’s in at least two important respects.
First, when the Brazilian Minister of Finance accused the United States in 2010 of beginning a «currency war», it was in response to a declining Dollar prompted by aggressive monetary easing on the part of the Federal Reserve. Since that easing might have been expected to increase aggregate demand in the US, and imports as well, it is not obvious that US policy at the time was detrimental to other countries.
Second, countries outside the US have not tried to reduce the value...