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Weaponized Currency:
Who Is Manipulating Whom?
Since Germany left the gold standard in 1931, finance ministers have fought a cold war in currency exchanges to artificially bolster their economies. In the age of Trump, there is no knowing where or when the next bout will begin.
Capital controls, with which governments regulate capital flow into or out of
a country, have been sug- gested as a viable response to currency manipulation. Yet most nations view them as extreme, and they are discouraged by the IMF.
MARKETS
  Currency wars have been a venue for economic nationalism since long before U.S. Treasury Secre- tary John Connally challenged
In the following decades, dozens of nations left the gold standard, and central banks intervened in the currency mar- ket countless times. So, while many know that the treaty that ended WWI laid the foundation for the next global conflict, most do not realize that it also drove the creation of a new
international (dis)order in finance. Today, advanced economies are in the midst of a currency cold war, but it is the developing world that is caught in no-man’s land.
NO ONE IS INNOCENT ...
Donald Trump made big news during his 2016 presidential campaign by complain- ing about China’s currency manipulation. It is true that, over the years, China’s central bank has rarely had a hands-off approach on both the domestic and inter- national levels. Pretending that currency
foreign finance leaders in 1971 with the
memorable line, “The dollar is our curren-
cy, but it’s your problem.” Germany was
the first modern government to artificially
devalue its currency to gain an advantage
in international trade. Back in 1931, the
country was suffocating under harsh repa-
rations stipulated by the Paris Peace Con-
ference at the end of the First World War,
and many of its creditors—starting with
dom—soon followed suit and abandoned the gold standard.
manipulation is a phenomenon found only in totalitarian re- gimes is a fantasy, not unlike the Paris Conference’s infamous War Guilt Clause. Like it or not, every world power has dirty hands.
The actions of the United States since the Great Recession provide a prime example of currency manipulation. Following the example of German politicians after World War I, the Fed
the United King-
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