International Journal of Business and Economic Development
ISSN 2051-848X (Print) ISSN 2051-8498 (Online)
Volume 5 Number 3 November 2017

The US won the global currency war against Europe and Japan: Their retaliation likely helped elect Trump

Stephen P. Magee

University of Texas, USA.

Hua Chen

Nankai University, China.


Currency War, the Euro, the Dollar, Quantitative Easing, 2008, the Great Recession, Monetary Policy


        The United States financial community, lax regulations and the Fed started a global currency war in 2002. The inadvertent cheapening of the US dollar was a by-product of what became the US subprime lending crisis and the financial collapse in 2008. From 2002-2008, the Fed created so much liquidity that the dollar fell 33% relative to the yen and 40% relative to the euro. In response to the 2008 crash, the Fed had to ramp up US money creation again, generating $4 trillion in money creation by 2014. World interest rates fell and raw materials and commodity producers in emerging markets borrowed nearly $5 trillion. Overproduction and the slowdown of China caused a Third World oil and commodity market collapse around 2015.

        Beginning in 2014, other advanced countries retaliated and declared a global currency war of their own against United States. They created their money with a vengeance. Just as the US had done, this made the currencies of Europe, Japan and Britain 20 to 25% cheaper and their goods became more competitive relative to US goods.

        As a result, the US became the importer of last resort for cheap foreign goods from 2014 until the election in November of 2016. Only time will tell whether the US currency war that we won from 2002-2014 and the retaliation war we lost from 2014-2016 helped Trump get elected.

        The parallel is inescapable that the US also started the world tariff and trade war in 1930 with the passage of the Smoot Hawley tariff, which extended the length of the Great Depression. The US currency war pushed Japan even further into recession and weakened Europe. US quantitative easing became a beggar-thy-neighbor policy against our trading partners.

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This work is licensed under a Creative Commons Attribution 3.0 unported (CC BY 3.0)

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