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Currency War – Without Borders!

As written earlier this year the currency war is on with some countries trying to devalue their own currencies and thereby destabilizing nations that have pegged their currencies. The most influential currencies globally are still the USD and the EUR which roots go back to pegs of D-Mark times.

After Switzerland was forced to give up its peg in January eyes moved on to other smaller economies in Europe like Denmark that so far has managed to defend the Krone by repeatedly cutting interest rates. The question again is how long will hey maintain their “success” not becoming another Switzerland?

Since 2008 the number of currencies that are monitored by the IMF that are free floating (no intervention) has decreased from 40% to 34%. The problem with pegging currencies is simply that central banks rely on the mercy of anothers country fiscal and monetary policy. That gives them less freedom to respond to domestic goals such as jobs or containing prices.

How can we get back to normal?


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