The New Monetary Accord No One’s Talking About

by James Rickards
Daily Reckoning

The currency wars started in 2010 with the weak Chinese yuan. Barely a week went by without Treasury Secretary Tim Geithner complaining about Chinese currency manipulation and the weak yuan.

By 2011, China was doing better and the U.S. was stuck in a rut of low growth coming out of the 2008–2009 recession. This necessitated a weak dollar to give the U.S. economy a lift in the form of higher exports, more jobs in the export sector and more inflation due to higher import prices.

That’s the basic currency wars formula — lower export prices to create jobs and higher import prices to get inflation.

Currency wars involve devaluation of your currency as a form of monetary ease. Devaluation is what you do when you can’t get growth any other way.

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