Economist Magnus: Currency War 'Will Likely Stay for Some Time'
Wednesday, 28 Jan 2015 07:00 AM
By Dan Weil
The global currency war rages on, with China's central bank pushing the yuan to a seven-month low this week.
China's economic growth sagged to 7.4 percent in 2014, the lowest rate in 24 years, and the government hopes that a weaker currency will boost exports.
The problem, of course, is that many other nations are trying to devalue their currencies as well for the same reason. The euro plunged to an 11-year low against the dollar Monday in the wake of last week's decision by the European Central Bank to launch a 1.1 trillion euro quantitative easing (QE) program.
And the greenback soared to a seven-year high against the yen in December amid the Bank of Japan's massive QE operation.
"These problems [of sluggish economic growth] have expressed themselves in a reliance in countries either maintaining cheap currencies or allowing them to depreciate," George Magnus, former chief economist at UBS, told The Wall Street Journal.
"This is a phenomenon that will likely stay with us for some time."
Many experts are worried that the currency conflict will intensify. "So far it is a war, but it's being played like a chess match," Art Cashin, UBS' director of floor operations at the New York Stock Exchange, told CNBC.
"That laid-back cerebral attitude is going to disappear. At some point somebody is going to get their currency to a place where it's going to cause enough pain to somebody else, and then it's going to turn into a real war. . . . This currency war cannot go well. They never have."
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Poster Comment:
Bad news for us all. Maybe we will see some deflation, which might be a good thing. We could all use some lower prices.