The New Rules: Defusing the Global Currency War

The New Rules: Defusing the Global Currency War

After having cooperated to an unprecedented degree -- on stimulus spending and new bank rules, for instance -- to avoid a global meltdown these past two years, the world's major economies now appear ready to turn on one another with truly self-destructive vengeance. Poorly informed Americans are increasingly convinced that free trade pacts -- and not our uniquely high corporate tax rates -- are responsible for sending jobs overseas, and they want to see China punished with tariffs on its imports for its undervalued currency. With China's neighbors intervening heavily to keep their own currencies from rising too high in response, global chatter about the unfolding "currency war" has reached a fever pitch. Is this any way to manage a tenuous global economic recovery?

If that weren't enough, China's growing diplomatic hubris, its deliberate maritime belligerence in the South China Sea, and its all-too-predictable response to the awarding of the Nobel Peace Prize to jailed democracy activist Liu Xiaobo makes for a ready-made villain for everything that ails a freaked-out America. Unfortunately, none of America's problems will be solved by a Smoot-Hawley redux -- especially one aimed directly at its "banker."

It would be easy to write this all off as "a failure to communicate" -- easy, and incorrect. To the contrary, both sides have been pretty clear on what they seek: America wants a rebalancing of the global economy that allows it to double its exports, pronto, and believes a truly convertible renminbi -- meaning one whose value naturally rises in response to heightened international demand -- is the fastest path to that desired outcome. China seeks to shift its economy from export-dependence to domestic consumption and to make the renminbi truly competitive to the dollar as a global reserve currency.

Keep reading for free!

Get instant access to the rest of this article by submitting your email address below. You'll also get access to three articles of your choice each month and our free newsletter:

Or, Subscribe now to get full access.

Already a subscriber? Log in here .

What you’ll get with an All-Access subscription to World Politics Review:

A WPR subscription is like no other resource — it’s like having a personal curator and expert analyst of global affairs news. Subscribe now, and you’ll get:

  • Immediate and instant access to the full searchable library of tens of thousands of articles.
  • Daily articles with original analysis, written by leading topic experts, delivered to you every weekday.
  • Regular in-depth articles with deep dives into important issues and countries.
  • The Daily Review email, with our take on the day’s most important news, the latest WPR analysis, what’s on our radar, and more.
  • The Weekly Review email, with quick summaries of the week’s most important coverage, and what’s to come.
  • Completely ad-free reading.

And all of this is available to you when you subscribe today.

More World Politics Review