Currency Wars

Currency Wars are occured among the world's leading economies and are not a new concept. Economist Robinson (1937) defined current policies as the concept of "neighbor beggar" to explain the similar situation in the 1930s, it is said that he was inspired by a card game. According to this game, if there is a winner, there is definitely a loser. Economically the "neighbor beggar" policy; It is a policy that a country applies against countries where it applies import restrictions and exchange rate policies to solve problems such as inflation, balance of payments, and unemployment.

The main argument of this policy is the devaluation (depreciation) of the domestic currency against the foreign currency. The domestic currency, whose value is depreciating against foreign currencies, makes exports cheaper and imports expensive. In this case, imports decrease while exports increase. Therefore, there is an increase in the employment rate and income of the country implementing this policy. As a result, while policy implementation is positive for one country, it hurts other countries. Because the devaluation of the country's value for currency as a result of the decline in exports from other countries. In this case, other countries stop their own production and open their foreign trade deficit, as they start to buy the goods they previously produced cheaper by devaluing their domestic currency.

The declining demand after the global crisis revived the discussions on competitive exchange rate policies. Countries that started to stagnate with the global financial crisis blamed each other's external deficits and more to get rid of the recession and opposed each other mutually. These leading countries, the USA, the EU, Japan and China, took part in this war by losing their currencies in recent years. In fact, the reason for the war of exchange between these four actors is that they are both the world's largest economies and each other's largest foreign trade partners (Bircan, 2016). Even though currency wars are not so hot nowadays, money is still in their hands as an important weapon for states. We will see what kind of war awaits in cryptocurrencies by living it.

Ass. Prof. Orhan ÖZAYDIN

References

O. Özaydın, (2019) “Turkey Foreign Trade Interaction with Cross Exchange Rates: Beneath the    Currency Wars”, Journal of International Trade, Logistics and Law, e-ISSN 2149-9748, Vol. 5, Num. 2, p.59-69, 2019.

Bircan, B. (2016). Kur Savaşlarının Gelişimi ve Kur Savaşları Perspektifinden Türkiye. İstanbul: Marmara Üniversitesi Sosyal Bilimler Enstitüsü (Doktora Tezi).

Robinson, J. (1937). Beggar-my-neighbour remedies for unemployment. In In Essays in the Theory of Employment (pp. 210-230). London: Macmillan.