The currency wars began after the emerging subprime mortgage crisis in the United States and went through more than 10 years of preparation. In 2009, the United States launched quantitative easing (QE), which injected large amounts of money into other countries by printing dollars on a large scale, driving the assets of other countries to soar. Subsequently, in 2015, the Fed tried to raise interest rates, but was unsuccessful. However, the United States was not discouraged and took advantage of the outbreak of the global pandemic to push the influx of dollars more aggressively, further depressing the currencies of other countries. In 2020, the euro, the pound and the yen depreciated one after another, and the dollar seemed to have won. But surprisingly, the dollar has never been able to achieve the last step forward. Although in 2023, the Fed continues to raise interest rates, the dollar index has started**, and non-US currencies have started**.
At this point, the U.S. economy bore the brunt of the damage. The latest data showed that the U.S. manufacturing PMI was below 50 again in November, and U.S. Treasuries appeared, increasing consumer uncertainty about the future. The American people's expectations for future inflation are also rising, and they have lost confidence in the Fed. At the same time, the dollar's decline has been expanding, reaching 3% in November alone. However, unlike other currencies, the Japanese yen failed to ** and remained stuck near the 150 mark. Japan, on the other hand, continues to buy US Treasury bonds, seemingly intent on weighing on the yen.
After this fierce currency war, the United States is embroiled in a quagmire from which it cannot jump out. The monetary strategy, which had been prepared for many years, came to an end at the last minute. This result begs the question of what factors depend on the success or failure of a currency war
First of all, the execution of monetary policy is the key. The U.S. injected a large amount of dollars into the market through quantitative easing, which contributed to the influx of dollars, but failed to achieve the desired effect when raising interest rates. This shows that the implementation of monetary policy must be flexible and precise, and cannot blindly pursue a single goal.
Second, the global economic recovery and economic linkage are also crucial. Because of the boom in the U.S. market, the economies of other countries will suffer. However, the United States ignores the complexities of the global economy and does not take into account the interaction of other countries' monetary policies. This reversed the expectation of a depreciation of the dollar and led to a stalemate in the currency war.
In addition, monetary policy also needs to pay attention to the balance between domestic and foreign demand in the economy. Over-reliance on external demand exposes the U.S. economy to certain risks. In this currency war, inflationary pressures in the United States are rising, and consumer confidence is declining, which has caused some problems in the implementation of monetary policy.
Finally, the victory or defeat of the currency war is also related to the policy factors of other countries. Japan's purchase of U.S. Treasury bonds as a major force has also affected the direction of the currency war. For Japan, stabilizing the yen's exchange rate is crucial for both the energy import and export sectors. By buying U.S. Treasury bonds, stabilizing the dollar is a profit-maximizing option for Japan.
Currency wars are a complex and serious problem, and in the context of a globalized economy, countries want to maximize their own interests by adjusting exchange rates. However, currency wars are not a purely competitive game, and there are huge risks and uncertainties hidden behind them. The pursuit of self-interest leads to overall instability, and in the end it may hurt all participants.
With regard to currency wars, I personally believe that countries should pay more attention to cooperation and consultation to build a relationship of mutual trust. Only by handling monetary policy in an equal, fair and reciprocal manner can we achieve economic stability and sustainable development. At the same time, countries should also pay more attention to the balance between domestic and foreign demand when implementing monetary policies, and pay attention to the development of the domestic economy and the well-being of consumers.
In addition, the implementation of monetary policy needs to pay more attention to the overall economic situation and the balance of the global economy. Only in the context of global economic stability can countries achieve long-term and sustainable development. Currency wars are not the only way to solve problems, and countries can realize their long-term interests through upgrading and reforming their economic structures.
In short, there are huge risks and uncertainties hidden behind the currency war, which requires the joint efforts of all countries to establish a mechanism for cooperation and consultation and seek a win-win solution. Only by handling monetary policy in an equal and fair manner can we achieve stable and sustained economic development. For currency wars, we should remain vigilant and calm, and constantly explore new ways to meet the needs of the times.