2/15/2013
3:55 PM
The article I chose this week discussed the threat that a
currency war could cause a crash within the global economy. I am going to begin by explaining exactly
what a currency war is. A currency far
takes place when a country intentionally weakens its currency in an attempt to
boost its local economy. Weakening a
countries currency will help major exporting companies essentially boosting the
economy. It will also raise the value of
imported goods, essentially in the same manner that a tariff would. The war begins when other countries begin
dropping the value of their currencies as well.
Currently Japan has been accused of intentionally weakening the value of
the yen. They are doing this because they believe that it will boost the
economy by raising the value of major exports like Toyota. As a result, the International bank has
increased the bank of Japan’s inflation goal to 2%. There is a fear that this action could cause a
currency war resulting in a crash of the global economy. I think that this issue needs to brought to
the attention of the WTO before it is too late.
Other developing countries have begun to notice japans strategy and have
also attempted to mimic their actions.
If large economies attempt to respond to Japan’s weakening of the Yen,
it may result in a very dangerous currency war.
With the recent global economic decline, currency has been
overlooked. I believe that this is an
issue that needs to be paid very close attention to before our world experiences
serious global economic crash.
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