"International currency war," the source of the depreciation of the dollar.

<P> Recently, the Brazilian finance minister Mantega declared a "global exchange rate war" has already broken out, although this speech is to defend the Brazilian currency appreciation intervention, but the basic expression of the race down governments to improve their own currencies .competitive objective reality. .Recently, Japan, Korea and China Taiwan and other central banks in order to curb the currency appreciation, the implementation of a series of interventions. .At the same time, from Singapore to Colombia and other countries also issued a warning of the strong currency and the U.S. Congress is seeking to pass legislation forcing the RMB appreciation. .</ P> <P> the global financial crisis, countries in the platform through the G20 summit, the implementation of joint consultation loose monetary policy and fiscal policies to rescue and stabilize the global economy. .But the current situation indicates that these measures are to stop the spread of the crisis, prospects for recovery remains elusive. .Crisis is not terrible, terrible long-term stagnation, it makes governments into the problem of anxiety and with intent to pass on to other countries. .Therefore, more and more countries are turning their depreciation of the currency as a means to boost their economies, such as U.S. pressure on RMB appreciation. .</ P> <P> At the same time, the U.S. dollar, euro, yen and other international reserve currency is in front of the risk of devaluation, the currency adjustment will inevitably bring a strong ripple effect in other currencies, so that the global foreign exchange market is in a mess .exchange rate revaluation period. .Therefore, it is both self-interest rate war, but also the objective requirements of national exchange-rate revaluation, as countries within the accumulation of the structural and political issues, and global structural imbalances also exist between countries, a currency revaluation is inevitable .happen. .</ P> <P> In fact, the source of this war is the exchange rate depreciation of the dollar. .The Fed issued a statement last week that, compared for promoting full employment and price stability required for the task level of inflation in the long run, "some of the current low inflation rate," the Fed announced plans to provide additional facilities necessary to support economic recovery ., and gradually return to the inflation rate is consistent with the mandate of the Committee level. .This statement means that the Fed is likely to start another round of quantitative easing (market rumors have trillion level) policy. .</ P> <P> The problem is, the Fed last year, purchased a total of 1.25 trillion U.S. dollars of mortgage assets, but did not convert those dollars into a loan, the bank deposit the funds back to the Fed, but also returned to the Fed's balance sheet .. .So, start the second wave of quantitative easing, in addition to lower yields and borrowing costs, and can not solve the current problem, but the sharp depreciation of the dollar will start the process of depreciation of the dollar. .It is this expected to stimulate the international price of gold hit record highs this week, the dollar continued to weaken. .</ P> <P> Similarly, the euro into a debt crisis and the relative overestimation of the financial problems of the Japanese brought the cumulative depreciation of the yen, largely reflecting a structural crisis of the developed countries, and reflected in the exchange rate. .However, the emerging market countries do not bear the exchange-rate changes in the capacity of their fragile internal market and excess production capacity will be appreciation of the damage, therefore, the competitive devaluation States are likely to exacerbate international tensions and economic crisis. .The United States and the world in the early 30s of last century into a severe recession, but the real long-term depression evolved so that is sweeping the world thy-neighbor protectionism, which sowed the seeds for World War II. .In addition, the depreciation of the yen is the Asian financial crisis, then the fuse, if you have the world's major reserve currency depreciation will lead to a new global crisis. .</ P> <P> more severe situation in China. .On the one hand, due to lax monetary policy led to inflation and asset price bubbles, on the other hand, the real economy is facing serious overcapacity, and the government-led investment is also difficult to sustain due to the credit risk. .This situation means that if the appreciation of the renminbi (or hike), you may hit exports, investment and asset prices; if you do not appreciate (without interest), because the depreciation of the dollar will suffer more serious inflation and asset bubbles. .Therefore, no matter what the outcome of the exchange rate game, China will face serious challenges. .In fact, if the exchange rate and interest rates are too passive inaction to deal with external changes, such logic may not help the Chinese economy to the more difficult to cope with the situation. .</ P>.