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.
Add your Comment
or use your BestCashCow account