Currency Wars Revisited

Abstract

Central banks around the world have tried to stimulate their economies with a coordinated increase in their money supplies but without the destabilizing currency depreciations witnessed in the past. Although the US dollar has depreciated, emerging countries have enjoyed currency appreciation. Despite trillions of dollars added to the US money supply since the financial crisis, growth remains sluggish because people are not borrowing or spending. The Fed’s equilibrium models fail to capture the reality that economic sectors are highly integrated and reliant on the financial sector even more now than before the financial crisis.