Was The Third Currency War Launched In Twenty-First Century?
According to media reports, the concept of "global currency war" was put forward by Montiga, former finance minister of Brazil in September 2010 (G.Mantega).
Because, at present, the Federal Reserve has launched the second quantitative easing monetary policy, resulting in the depreciation of the US dollar. Many trade leads have changed back to the state to maintain export competitiveness, and compete against each other to depreciate their country's currency, thus causing another currency war in twenty-first Century.
The third currency wars in twenty-first Century are beginning.
However, in China, the term "currency war" has been very popular since the beginning of the war.
For those books, I pointed out that the theme of these books is to regard the history of human finance and trade as a history of currency wars.
The whole human race is the development of this kind of killing and bloody plundering.
But in fact, if the competition in the market is seen only as a war, then the market will not become the best system for human economic development.
Moreover, some strange ideas put forward by these books have long been eliminated from the market.
For example, to solve the financial crisis, we must make the monetary system return to the gold standard, and the Federal Reserve is private banking.
Therefore, although the concept of "currency war" will attract more people, I do not quite believe that analyzing the harmfulness of its concept is also a duty.
Now some people think that since twenty-first Century, there have been three currency wars in the world.
For example, the first currency war in twenty-first Century was centered on the dollar.
Between June 2010 and March 2011, the nominal effective exchange rate of the US dollar depreciated by 7.79%; China's RMB nominal effective exchange rate index depreciated by 4.44% because of the exchange rate pegged to the US dollar; the euro and commodity exporters did not participate in the currency competition devaluation.
During this period, the nominal effective exchange rate of the euro appreciated by 5.38%, which made the euro zone economy unable to benefit from exports. The nominal effective exchange rate of Brazil lira and the Australian dollar appreciated by 2.26% and 9.97% respectively, not only the export competitiveness was frustrated, but also the economic depression of these two countries and the inflow of hot money caused the real estate bubble to blow up.
The second currency war refers to Abe Shinzo's assumption of the Japanese Prime Minister in 2012, promoting Andouble's economics and the Federal Reserve's quantitative easing policy.
The protagonist of the currency war is the Japanese yen.
The effective nominal exchange rate of Japanese yen devalued 25% from July 2012 to December 2013, and the US dollar nominal effective exchange rate index rose by only 0.2% as the U.S. pushed QE3 to offset the competitive disadvantage.
However, the nominal effective exchange rate index of the euro and the Korean won increased by 11% and 10.9% respectively, while the nominal effective exchange rate of the renminbi appreciated by 7.4%.
The third currency war in twenty-first Century was the euro from the second half of 2014 and the currency war launched.
In June, when the European Central Bank (ECB) implemented negative interest rates and launched a long-term financing operation (TLTRO) and announced the promotion of ABS and secured bond purchase plans in September, the euro's exchange rate against the US dollar declined from 1.39 in May 6th to 1.24 in November 24th, with a depreciation rate of 10.8%.
Also, in October 31st, when the Bank of Japan announced the further expansion of quantitative easing monetary policy, the yen joined the ranks of competitive devaluation.
The yen depreciated against the US dollar from 109.42 in October 30th to 118.41 in November 24th.
The devaluation of the yen has seriously threatened the export competitiveness of Korea and Taiwan, resulting in a corresponding decline of 5.4% and 1.8% over the same period.
In contrast, although the US dollar index has risen 10.5% since July, it has become the most powerful currency in the world. However, during the same period, the appreciation of RMB against the US dollar was only 1%, and the nominal effective exchange rate index of the renminbi has appreciated by nearly 10% since July, making it the biggest victim of the global currency war.
In order to alleviate the erosion of exchange rate appreciation to export competitiveness and reduce the risk of domestic real estate collapse, the Central Bank of China announced its interest rate cut in November 21st, and in November 24th, the RMB depreciated to 0.3% against the US dollar.
From the point of view of currency war mentioned above, it mainly refers to the appreciation or depreciation of currency caused by changes in monetary policy and economic conditions.
It regards the depreciation of the currency as favorable and the appreciation of the currency is unfavorable.
In fact, this view is only based on whether monetary change is conducive to trade exports, and other aspects are not related.
But this is not the case.
For example, the depreciation of the yen actually does not have such a big impact on Japan's domestic economy, its exports account for less than 20% of GDP, and export growth is meaningful for economic growth, but not so great.
Moreover, the appreciation or depreciation of the currency exchange rate is not only a double-edged sword, but also a major adjustment of interest relations.
If a currency continues to appreciate or depreciate, it involves not only the redistribution of interests among different countries, but also the adjustment of the central bank's monetary policy and the incentive orientation of enterprises. At the same time, it also involves the ability of the currency to continue to appreciate.
I have always advocated
gold
The standard one price mechanism is different. At present, the international monetary system dominated by the credit currency and the dollar should be determined by a standard or an econometric econometric model.
currency
The price relationship with another currency is totally impossible.
In this case, the appreciation or depreciation of the currency depends entirely on the considerations of the national interest, rather than just a representation seen by the market.
Therefore, the above analysis indicates that after the third currency wars began in twenty-first Century, China had to take part in the currency war because of the excessive appreciation of the nominal effective exchange rate of RMB.
This paper argues that this analysis is not necessarily right.
Because through economic pformation, China's economy has begun to get rid of its dependence on exports and began to shift to domestic consumption and investment.
Under such circumstances, China's domestic demand is far stronger than its exports, and the depreciation of the renminbi will definitely be unfavorable to China's imports.
Especially when the large depreciation of the RMB caused a large amount of capital to flow out of China, the problems faced by the Chinese economy will be bigger.
But the Renminbi should not be appreciated unilaterally, which will also lead to the influx of hot money into China, leading to the further expansion of the real estate bubble.
In fact,
international market
Exchange rate change is not a currency war. Investors should pay more attention to the direction of currency exchange rate changes.
Such capital flows may lead to major adjustments in the pattern of interest in the international financial market, causing sharp fluctuations in asset prices in various countries.
This is what investors should be most concerned about, rather than an imaginary currency war.
As long as it is the market, the exchange rate is always fluctuating. Exchange rate fluctuations and fluctuations are not a war, but a normal state.
Only by grasping this normality can investors win in the fluctuation of exchange rate.
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