Your Guide to Currency Wars

A blog about business and economics.
Feb. 15 2013 12:16 PM

The "Currency Wars" Wars Heat Up

672798
One dollar bill notes pass through a printing press November 21, 2001 at the Bureau of Engraving and Printing in Washington, DC.

Photo by Alex Wong/Getty Images

A lot of people seem very upset that expansionary monetary policy is just a covert way of waging "currency wars." I think that's backward. Currency depreciation is just a covert way of engaging in expansionary monetary policy, and expansionary monetary policy is great. Currency wars—i.e., simultaneous monetary expansion in the world's major rich countries—is exactly what the world needs.

On my side of the debate, you can find Greg Ip at the Economist and of course the great Paul Krugman.

Advertisement

As for the other side of the argument, well, I don't quite get what the other side of the argument is.

I've clashed with Carnegie's Devin Stewart on this a couple of times, though, and I think I'm coming to grasp what his concerns are. If leaders fixate on the idea that the sole virtue of expansionary monetary policy is exchange-rate depreciation and higher net exports, then we risk a scenario in which countries end up in an escalating trade war involving noncurrency measures, too. That would be destructive, I agree. But the correct remedy isn't for countries to stick with too-tight monetary policy out of fussy aversion to currency wars. The remedy is to try to spread understanding that monetary stimulus isn't only about exchange-rate effects and net exports. For very small countries that is probably what it's mostly about, but for bigger countries it's a side issue. The point of monetary stimulus is to induce firms to want more capital goods and less cash and households to want more durable goods and less cash. You should definitely end up with more gross exports if you undertake expansionary policy, but the net exports factor is a sideshow and depends largely on what your trade partners want to do.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

Trending News Channel
Sept. 19 2014 1:11 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Weigel
Sept. 20 2014 11:13 AM -30-
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 20 2014 3:21 PM “The More You Know (About Black People)” Uses Very Funny PSAs to Condemn Black Stereotypes
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.