THE GLOBAL MONETARY SYSTEM WOULD BE CHANGED .
Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a particular currency falls, so too does the real price of exports from the country. Imports become more expensive too, so domestic industry, and thus employment, receives a boost in demand both at home and abroad. However, the price increase in imports can harm citizens' purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries.
Competitive devaluation has been rare through most of history as countries have generally preferred to maintain a high value for their currency; have been content to allow its value to be set by the markets or have participated in systems of managed exchanges rates. An exception was the episode of currency war which occurred in the 1930s. The period is considered to have been an adverse situation for all concerned, with all participants suffering as unpredictable changes in exchange rates reduced international trade.
According to Guido Mantega, the Brazilian Minister for Finance, a global currency war broke out in 2010. This view was echoed by numerous other financial journalists and government officials from around the world. Other senior policy makers and journalists have suggested the phrase "currency war" overstates the extent of hostility, though they agree that a risk of further escalation exists.
Currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a particular currency falls, so too does the real price of exports from the country. Imports become more expensive too, so domestic industry, and thus employment, receives a boost in demand both at home and abroad. However, the price increase in imports can harm citizens' purchasing power. The policy can also trigger retaliatory action by other countries which in turn can lead to a general decline in international trade, harming all countries.
Competitive devaluation has been rare through most of history as countries have generally preferred to maintain a high value for their currency; have been content to allow its value to be set by the markets or have participated in systems of managed exchanges rates. An exception was the episode of currency war which occurred in the 1930s. The period is considered to have been an adverse situation for all concerned, with all participants suffering as unpredictable changes in exchange rates reduced international trade.
According to Guido Mantega, the Brazilian Minister for Finance, a global currency war broke out in 2010. This view was echoed by numerous other financial journalists and government officials from around the world. Other senior policy makers and journalists have suggested the phrase "currency war" overstates the extent of hostility, though they agree that a risk of further escalation exists.
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