What the Latest Currency ‘War’ is All About | WHAT REALLY HAPPENED

What the Latest Currency ‘War’ is All About

When the US embarks on perennial quantitative easing, that’s OK. When the EU does QE as well, that’s OK. But when the Bank of China decides it’s in the best interest of the nation to let the yuan go down a bit instead of infinitely up, that’s Armageddon.

An internationalized yuan established as a global reserve currency implies a "market-determined" exchange rate policy.

It took the Bank of China to devaluate the yuan on two consecutive days — moving within the 2 percent band that it’s allowed to — for the proverbial global financial banshees to go completely bonkers.

Forget the hysteria. The heart of the matter is that Beijing has stepped on the gas in a quite complex long game; to liberalize the yuan exchange rate; allow it to free float against the US dollar; and establish the yuan as a global reserve currency.

So this is essentially exchange rate policy liberalization — not a currency “war”, as the frenetic spin goes from Washington/Wall Street to Tokyo via London and Brussels.

Let’s check some expert reaction

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