The Dollar Joins the Currency Wars

Countries want to export more than they import and promote growth and employment. More than 20 central banks around the globe have eased monetary policy, reducing the value of their currencies to make exports more attractive, explains economist Nouriel Roubini for Project Syndicate. He notes that trade and lending imbalances are growing. “The dollar has also risen relative to currencies of emerging markets with economic and financial fragilities: twin fiscal and current-account deficits, rising inflation and slowing growth, large stocks of domestic and foreign debt, and political instability,” he explains. But US officials are increasingly nervous about the imbalances as the dollar gains in strength without an increase in consumption. Roubini expresses concern that currency struggles could lead to trade wars and protectionism. He concludes that countries can’t all be exporters and should instead promote policies in support of balanced trade with investment in infrastructure and job creation. – YaleGlobal