Recent Problem of Global Capitalism: Rate of Exchange Wars

Abstract

Abstract Globalization has a vital role in economic, social and political modeling of the 20th century. Along with globalization, trading contracts, discounts in the applied tariffs and expanded trading networks have restored economics to a totalitarian structure. Favorable and unfavorable effects of this totalitarian structure, generated by rapidly expanding globalization, have revealed themselves in time. However, given the economic crises experienced in global economy during recent years, unfavorable and destructive effects of globalization are discussed a lot more. Hence, during the second quarter of 2007, the crisis, which started in the real estate market in USA and reflected in financial and real sectors, has folded into a global dimension and driven many EU countries to the brink of bankruptcy, particularly Greece, and this in turn has become the most prominent indication of destructive effects recently. Countries, especially USA, which experienced depression with the effect of the crisis, have been seeking solution for reinstating economic power in the centerline of protectionism. Indeed, a similar search was observed following 1929 Crisis and especially USA had increased protectionist measures following the crisis in its economy surrounded by high customs walls. These arrangements made in quota and tariffs in 1930s substantiate as interventions in the rate of exchange nowadays. Countries, which interfere in the rate of exchange and attempt to solve their economic problems by securing drop of their national currency against foreign currencies, influence exports of other countries and gain substantial power advantage. Thus, this war started years ago by China, one of the greatest economies in the world, was continued by USA due to 2008 Crisis and by Japan and China later on, and has carried the rate of exchange war appeal into the international agenda once again. However, USA, supporting the economy with dollars by purchasing bonds from the market starting in the first year the crisis emerged, announced a decrease in the bond program that was continued for five years by considering the improvement experienced in macroeconomic data by the end of 2013. Certainly this decrease would create unfavorable effects for economies struggling for financing the current deficit in developing countries specifically. Since the decrease in bond purchase would increase bond interests in USA, directing of capitals to USA market by foreign investors would affect countries unfavorably such as decrease in hot money flow in developing countries. In this study, the way the developed countries, for instance USA and Japan, referred to monetary expansion was scrutinized and the rate of exchange wars were examined, and negative effects of this policy on the economy of developing countries, especially in the economy of Turkey were studied, when decrease in monetary expansion was observed in USA in the macroeconomic data.