Currency War

Ever since the finance minister of Brazil announced in September of 2010 to a group of industrial leaders gathered in Sao Paulo that nations of the world were engaged in a currency war, there have been these unconvincing denials by money printing central bankers around the world that they were merely trying to resuscitate their respective moribund economies in an environment of shrinking demands. Never mind the results of money printing weakens one's currency and thus helps the nation in gaining an increasing share of limited demand. With the election of Shinzo Abe, Japan stripped away the veil by setting explicit exchange rate targets. Now the world is up in arms, thus during the gathering of G7 nations in London, they felt compeled to issue this statement:

The Group of Seven leading economies Tuesday attempted to head off a potentially destabilizing round of currency devaluations, issuing a statement that reaffirmed their commitment to let market forces determine exchange rates, and saying central bank policy will be focused solely on domestic objectives.

The question of currency devaluations is an awkward one for industrialized nations, many of which have embarked on monetary policies designed to boost their economies that have the side effect of lessening the value of their currencies. The U.S. Federal Reserve's bond-buying policy has previously sparked world-wide concern given its impact on the dollar.

In the statement, the G-7 made it clear that their central banks weren't attempting to weaken their respective currencies when they engaged in monetary stimulus, but simply were trying to support flagging domestic demand.

In international politics, the fact that nations pledge not to do it, is how we know they have been doing all along and will continue to do so.