Now the US, relying on the same flawed theory [of quantitative money], is doing it again. Not surprisingly, China accuses it of deliberately aiming to depreciate the dollar. But the resulting increase in US exports at the expense of Chinese, Japanese, and European producers is precisely the purpose.<\/p>\n
The euro will become progressively overvalued, just as the gold bloc was in the 1930\u2019s. Since the eurozone is committed to austerity, its only recourse is protectionism. Meanwhile, China\u2019s policy of slowly letting the renminbi rise against the dollar might well go into reverse, provoking US protectionism.<\/p>\n
The failure of the G-20\u2019s Seoul meeting to make any progress towards agreement on exchange rates or future reserve arrangements opens the door to a re-run of the 1930\u2019s. Let\u2019s hope that wisdom prevails before the rise of another Hitler.<\/p>\n