Jan 23 (Reuters) – You might want to learn to stop worrying
and love currency wars, which are here to stay and, for
investors, might not be all that bad.
A host of central bankers and policy makers have been
talking currencies in recent days, generally about how their own
should be weaker and other peoples’ should be strong.
This is a natural result of the interaction of growth being
scarce and of aggressive monetary easing in many leading
economies. Everyone wants to capture what growth there is, and
those who ease monetary conditions through asset purchases get
the benefit of weaker currencies which make their exports more
The risk, as in the 1930s, is in a round-robin of aggressive
currency weakening leading to tariffs and trade wars, which
don’t just reapportion the pie but which tend to shrink it.
This doesn’t have to happen, and until it does the best way
to think of the currency wars is as monetary easing by another
name. If Japan, as it is and will do, creates money and drives
the value of the yen down it not only creates demand at home by
encouraging cash off of the sidelines, it also encourages other
countries to follow suit with their own easings.