by Tyler Durden
With Abe picking his new dovish playmate, and Draghi doing his best
to jawbone the EUR down without actually saying anything, it is becoming
very clear that no matter what level of bullshit histrionics is used by
the politicians and bankers in public, the currency wars have begun to gather pace.
Japan's more open aggressive policy intervention is the game-changer
(and increasingly fascinating how they will talk around it at the
upcoming G-20), as if a weaker JPY is an important pillar of the
strategy to make this export-oriented economy more competitive again, it
brings into the picture something that was missing from earlier
interactions among central banks of the advanced economies – competitive depreciation. The last time the world saw a fully fledged currency war was in the early 1930s. Morgan Stanley's Joachim Fels looks at what it was like and what lessons can be drawn for the sequence of events - there are definite winners and losers and a clear first-mover advantage.
Via Morgan Stanley, Back to the 1930s? What Would a Currency War Look Like?
What did the currency war of the 1930s look like?
The backdrop for the currency war of the 1930s was the Gold Standard
and the Great Depression (many economists blame the former for the
latter). By fixing the value of the currency to the price of gold, the
Gold Standard prevented a country from printing too much money. If it
did, people would simply exchange it for gold (or for other currencies
pegged to gold).