The obstacles to a political influence on monetary policy have apparently not only fallen in countries with a correspondingly bad reputation. The step to the next border crossing is obvious: the activation of monetary policy; no longer only subliminal by the political attempt to convince monetary policy of the necessity of an even stronger expansion, but by a targeted devaluation policy of the domestic currency.
It is not for nothing that not only the speculations about interest rate cuts have been overturning in recent months. The tiresome debate about a global currency war is also picking up speed again. Although the discussion may sound familiar, it currently has a new component. The financial markets now recognise the limits of traditional monetary policy and the (perceived) hopelessness of the central banks to such an extent that they even allow room for speculation about currency market interventions. And this not only with the usual suspects (China, Switzerland), but for the first time in well over two decades also again in the USA. Just as willingly one assumes the other currency officials world-wide to follow this crossing of the Rubicon without long hesitation and to retaliate the same with the same. Or in other words, welcome to the global currency war.
So far, it has only been a matter of creating a monetary threat backdrop. Comparable to the nuclear arms race of the last millennium, all those involved are betting that nobody will take the first step with a clear mind, since there is – actually – agreement that a nuclear (or monetary) escalation only knows losers in the long term. Characteristic of a balance of terror is its dynamic of reciprocal, high-swinging threats. So there is much to suggest that the last word between the superpowers in the currency market has not yet been spoken, but that we worldwide verbal interventions will soon be part of our everyday lives.