” “Currency wars” are all the rage right now.
In Japan, Switzerland, and the U.K., currencies are rapidly falling, and many are accusing these countries of purposely depressing their currencies in order to boost exports at the expense of other nations.
One could argue that this is the case in Japan. However, reality may be decidedly less exciting.
In a note to clients this morning, Goldman Sachs analyst Kamakshya Trivedi says the evidence points to a much more basic phenomenon: these countries are simply trying to boost stagnant economies via monetary easing.
The title of Trivedi’s report is perfect: Currency Wars? No, Just Monetary Easing.
It’s true that a side-effect of these monetary actions actions is, of course, a weaker currency – but that’s only a secondary phenomenon.
The real story is the attempt by various countries (notably Japan) to lower real interest rates, writes Trivedi….”
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