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"Currency War?, of course

Immanuel Wallerstein

Socialism 21

Currencies are a very particular economic problem. Because currencies are the real relationship in which some win and others lose. Whatever the merits of the revaluation or devaluation of a particular currency, these merits are profit only if others lose. You can not devalue everyone at the same time. It is logically impossible and therefore irrelevant in politics.

The situation is well known worldwide. We have been living in a world where the U.S. dollar has been the world's reserve currency. This, of course, has given America a privilege that no other country has. You can print your currency at will, whenever you think it solves the immediate economic problems. No other country can do this, or rather no other country can do so without penalty as the dollar remains as the reserve currency accepted.

is also well known that for some time now, the dollar has been losing value against other currencies. Despite fluctuations continuous curve has been downward for perhaps 30 years at least.

The countries of Northeast Asia, China, Korea and Japan have initiated policies concerning currency that other countries have criticized. In fact this is a matter that is the subject of constant attention in the media. However, to be fair, not at this time is by no means easy to establish the wisest policy, even from the selfish perspective of each country.

I believe the underlying issue is simpler than the intricate explanations of most political analysts. Start with a few assumptions. The dollar's status as reserve currency of the world system is the ultimate advantage available to the United States in the world system today. It is therefore understandable that the United States will do its best to maintain this advantage. To do this requires the willingness of other countries (including, notably, those of northeastern Asia), not only to use the dollar as a way to calculate the transfers but as something in which to invest their surplus (particularly in U.S. Treasury bonds .)

However, the dollar exchange rate has been creeping steadily. This means that these surplus funds invested in treasury bonds worth less with each passing year time. There comes a point where the advantages of such investment (being the main advantage to sustain the ability of U.S. companies and individual consumers to pay for its imports) will be less than the loss of the real value of investments in Treasury bonds. Both curves move in opposite directions.

The problem is one that is present in any market situation. If the value of a stock is falling, the owners want to get rid of them before they fall too low. But if a large shareholder gets rid of them very fast, it may impel others to run to sell, causing even greater losses. The game is always find an elusive moment to get rid of the shares, one that is neither too late nor too early, nor too slow or too fast. This requires a perfect sense of time, and the pursuit of the perfect synchrony is the kind of view that is often distorted.

This is what I see as basic picture of what is happening and will happen to the U.S. dollar. Can not continue to maintain the global confidence once enjoyed. Eventually, economic reality will tie him. This can happen in a flurry of five minutes or a much slower process. But when it happens, the key question is what will happen then?

Today there is no other currency which is the balance needed to replace the dollar as reserve currency. That being the case, when the dollar falls there will be a reserve currency. We will be in a multipolar world currency. And a multipolar world currency is a very chaotic world in which no one feels at ease because the sharp turns constant exchange rates make it very precarious minimally rational short-term economic predictions.

Managing Director International Monetary Fund, Dominique Strauss-Kahn, at this time publicly warned that the world is plunging into a war of currencies, resulting could have a negative and very harmful in the longer term .

A real possibility is that the world can be reversed, it seems to me that it is already doing, to barter arrangements in fact, a situation that is not really compatible with the effective functioning of the world-economy capitalist. Caveat emptor !, Buy at your own risk!