Currency wars threaten to undermine global economic recovery

The specter of currency wars are looming as nations try to jump start their economies during a global downturn. China has been on the receiving end of mounting U.S. pressure to force the communist government to open the yuan to free market forces. Japan, Brazil and many other nations are devaluing currencies to make their products cheaper abroad. As currency manipulation spreads. Article resource – Currency wars threaten to undermine global economic recovery by Personal Money Store.

Nobody wins a currency war

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. The BBC reports that although countries manipulate currencies for economic advantage, the cumulative effect undermines the global economy. Unilateral action by one central bank ignites conflict in other parts of the world. Japan wanted to make its goods cheaper in the U.S. so it weakened the yen. The U.S. currency dispute with China just got worse when this happened since the dollar got stronger and the exports rose.

Europe becomes part of U.S. dispute with Chinapan>

Congress wants to bring out the heavy artillery. The Associated Press reports that the House has approved legislation calling for economic sanctions on China and other countries manipulating their currencies to get an edge on trade. The U.S. wants more jobs to be created. It is going about this by trying to have the dollar fall 40 percent against the yuan in China. It is expected that the Federal Reserve will print billions of dollars in new money in order to weaken the dollar like this. European governments are getting mad since the Euro is rising due to that action since the each and every country has a global economy to worry about.

Why it would be bad to manipulate currencies

The currency wars should be better off after this weekend. The International Monetary Fund can be meeting in Washington to discuss it. However, David Sterman at Investing Answers said the real solution is for the world to change its consumption habits. The global economy will function better if countries like China and Japan boost domestic consumption in order to cut back trade supplies. This is what Sterman says. Trade deficits have to be reduced by countries like the U.S. be exporting. President Obama wants to double U.S. exports in five years. 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