The world at war; the weapon: depreciation. Brazilian Finance Minister Guido Mantega has warned in remarks reported from Sao Paulo. "We're in the midst of an international currency war, a general weakening of currency," he said in remarks reported by the Financial Times newspaper. "This threatens us because it takes away our competitiveness." Japan, South Korea and Taiwan have intervened recently to pull down the value of their currencies, the newspaper noted, and the dollar has fallen by about 25 percent so far this year against the Brazilian real. Such a decline increases the price of Brazilian exports on the US market.
Barry Eichengreen provides a summary of the economic implications of currency wars. Here are a few study questions
Why is China keeping its exchange rate artifically low?
Why are the US and Europe contemplating weaker currencies?
How are these policies related to beggar-thy-neighbor effects?
What are the alternatives to beggar-thy-neighbor policies?
Who is the winner in this war?