Countries are racing to debase their currencies. This makes imports more expensive and increases the value of exports. It improves the trade deficit. It is the first thing that you want to do when times are rough. For the US, it is difficult because a rough global environment and a fall in commodities leads to a flight to the dollar which should drive the dollar higher. But, by bringing interest rates to 0, the dollar is at least being held at a low rate vis-a-vis the Euro and the yen. The GPB, however, is something different as the UK's central bank has moved aggressively to lower their rates and to debase their currency.
Lowering rates and watching your currency fall is an easy move to explain politically. It is easy to say: "We had no choice. Our economy was faltering and we needed to lower rates." Exporting companies in the affected country can't do anything other than urge their central banks to take similar measures.
In this era of global trade and globally interrelated economies, it would no longer be acceptable for a country like the US or the UK to throw up trade barriers - adding taxes and tariffs to Japanese, Chinese or German products. That would be met by a host of countermeasures by the affected country.
Sponsor Updates and Offers
|
|
|
Related Articles:
Summer Vacation for the Fed by PhilR - Jun 23, 2007
Fed Interest Rate Decision Coming on Thursday by JRubinstein - Jun 27, 2007
Heads in the Sand -- Inflation sure ain't "moderate" by walt - Jun 29, 2007
Bernanke Dodges Real Inflation by esther - Jul 19, 2007
Bernanke at the brink -- a lousy time to have an academic by paul - Aug 05, 2007
My Bagel Guy and Me by soczie - Aug 09, 2007
eToro Tries to Simplify Currency Trading by Mass Market Tech - Nov 27, 2007
$3.2 Trillion in Currency Traded Per Day by Canuck - Sep 25, 2007.
Add to reading list
