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Currency wars: Perception and reality

White Paper by Prof. Barry Eichengreen

17 MAY 2013


Recently, there has been a lot of buzz in the media about currency devaluation, whether it be through quantitative easing or aggressive reflationary policies. Deutsche Asset & Wealth Management's Global Financial Institute (GFI) brings you an expert opinion on the topic through Professor Barry Eichengreen (UC Berkeley), who is also a member of GFI's advisory board. Prof. Eichgengreen is one of the world's leading academic authorities regarding global currencies and is author of bestsellers such as "Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System".

In this new white paper, titled "Currency Wars: Perception and Reality", Prof. Eichengreen presents his case that not all manipulations by governments or central banks to devalue its country's currency are necessarily a "currency war". He points out that, not only is the term "currency war" insufficiently defined even in leading economic textbooks, it is incorrectly associated with various negative stigmas dating back to as far as the 1930s.

However, Prof. Eichengreen also raises the observation that these negative stigmas are in fact inaccurate. Viewing global economic trends from a long-term perspective, past "currency wars" have had a positive effect on all involved countries compared to the circumstances prior to it, where policies did not change and exchange rates did not move.

In this white paper, Prof. Eichengreen delves deeply into the topic, both from a historical and current perspective, supporting currency devaluations that are meant to return bilateral exchange rates to their normal healthy levels.