The Wall Street Journal reports on new incentives for even more currency manipulation. Countries that rely upon engineering permanent export surpluses and siphoning money out of the US consumer market are not getting all the growth they want.
Weak Export Growth Raises Prospect of Currency Moves (Subscription required)
Sluggish Global Trade Growth Is Tempting Officials to Devalue Their Currencies to Jump-Start Economies
By IAN TALLEY, The Wall Street Journal, 10/6/14
The world’s export engines are sputtering, putting new pressure on many nations to weaken their currencies to jump-start their economies.
Export growth in many countries that rely heavily on selling their products abroad is again failing to meet expectations for a pickup. Germany, which posts the world’s largest trade surplus, saw its export growth slow to just 0.9% last year after averaging more than 8% for years before the financial crisis. China, which counts on exports to power the world’s No. 2 economy, has seen export growth slow to just 8.6% last year after a decade of export growth averaging about 20% annually.
The problem is pervasive, extending beyond countries with trade surpluses. Sluggish U.S. export growth is one factor restraining the American economy this year, a trend likely to be worsened by a strengthening dollar that makes U.S. products more expensive abroad. ...
The feeble recovery is tempting officials to devalue their currencies, a policy that prices their exports more favorably for international buyers. Top finance officials trying to talk down the value of their exchange rates have resurrected warnings of a global currency war. Such tit-for-tat devaluations tend to create short-term growth at other countries’ expense.
European Central Bank President Mario Draghi has praised the euro’s decline, an indication to investors that a weaker currency is a key ECB policy objective. Bank of Japan governor Haruhiko Kuroda made similar remarks about the yen’s value. South Korea and China have come under fire for keeping their currencies lower than levels many economists say would reflect fair market values.
Currency devaluation is an easier approach than deeper economic overhauls that face political hurdles, particularly in countries with mounting debt and high unemployment. ...