Currency Wars Evolve With Goal of Avoiding Deflation

Countries once worried about inflation or rising prices now fret about deflation and adjust currencies accordingly, reducing costs of their exports relative to other economies. Trouble is, many nations are jumping in to this game, leading to stagnant wages and job growth. Global consumers anticipate price declines and delay spending. “Brazil Finance Minister Guido Mantega popularized the term ‘currency war’ in 2010 to describe policies employed at the time by major central banks to boost the competitiveness of their economies through weaker currencies,” reports an article from Bloomberg. “Now, many see lower exchange rates as a way to avoid crippling deflation. Weak price growth is stifling economies from the euro region to Israel and Japan.” To counter the effects, many nations continue with stimulus programs and low interest rates to encourage spending. – YaleGlobal