Currency War
A Currency War takes place when two or more countries try to devalue their currencies against each other for their own economic benefit.
- Currency Wars tend to start when countries experience weak growth and excessive debt
- Countries try to increase growth by weakening their currency (to increase demand)
- Typically currency weakening is only a short-term benefit
- Can provide short-term boost in exports
- Can reduce imports in short term
- Can cause inflation ( to help deal with debt)
- Short=lived because other countries will weaken their own currencies in retaliation
- Currency wars can go on for years with each country (or multiple countries) weakening their currencies over and over
- Currency wars tend to lead to trade wars (tariffs) because they don't have the intended long-term impactÂ