States accounting for two-thirds of the global economy are either holding down their exchange rates by direct intervention or steering currencies lower in an attempt to shift problems on to somebody else, each with their own plausible justification. Nothing like this has been seen since the 1930s.Read the rest here.
“We live in an amazing world. Everybody has big budget deficits and big easy money but somehow the world as a whole cannot fully employ itself,” said former Fed chair Paul Volcker in Chris Whalen’s new book Inflated: How Money and Debt Built the American Dream.
“It is a serious question. We are no longer talking about a single country having a big depression but the entire world.”
The US and Britain are debasing coinage to alleviate the pain of debt-busts, and to revive their export industries: China is debasing to off-load its manufacturing overcapacity on to the rest of the world, though it has a trade surplus with the US of $20bn (£12.6bn) a month.
Premier Wen Jiabao confesses that China’s ability to maintain social order depends on a suppressed currency. A 20pc revaluation would be unbearable. “I can’t imagine how many Chinese factories will go bankrupt, how many Chinese workers will lose their jobs,” he said.