Michael Parenti
Most economists and financial analysts think that ‘currency war’ merely refers to the competitive devaluations that nations sometimes engage in to help boost their domestic economies, as they had done in the 1930’s for example.
This time the currency war is a much more profound confrontation of differing agendas revolving around the historically unusual role of the US dollar, based on nothing more than the will of the Federal Reserve and the ‘full faith and credit’ of the US, as the reserve currency for global central banks and international trade.
When a single nation begins to wield such an ‘exorbitant privilege’ to underwrite the speculative excesses of a crony capitalist banking system, and perhaps even more importantly, as an instrument in support of their international policy, one ought not be surprised that the rest of the world will begin to resist it.
A currency must be policy neutral, without regard to any party if it is to be a true medium of exchange. Can this still be said of the US Dollar as it has been managed, especially since 1990?
As Alan Greenspan once correctly pointed out, but certainly did not heed when he was at the Fed, if a fiat dollar is managed by monetary policy such that it emulates gold, then it will be perceived as fair, and will certainly be above the particular domestic issues or international policy biases of a single nation that de facto wields the reserve currency status.
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