Devaluation spiral

In economics, a devaluation spiral is a vicious circle resulting from the devaluation of currencies . The International Monetary Fund was founded, among other things, to avoid such devaluation spirals.

procedure

At the beginning of a devaluation spiral stands the devaluation of a currency. The export prices of goods and services offered in that currency, then fall. A devaluation is therefore usually accompanied by a temporary increase in the export volume. Imports are becoming relatively more expensive.

Ways to influence the exchange rate

If one country has pegged its currency to another (for example, China has pegged its currency yuan to the US dollar again since summer 2008 ), the government of the pegging country can usually change the exchange rate of its currency by means of a declaration of intent.

If the currency is freely convertible (i.e. the price of the currency is freely determined in foreign exchange markets), such as the price of dollars in all other freely convertible currencies, then the government of a country can benefit through expansive monetary and fiscal policy and / or through foreign exchange market interventions that the price of their currency is falling.

Competitive paradox in the 1930s

An economic policy that seeks economic gain at the expense of other states is also known as "beggar-my-neighbor-policy" or "beggar-thy-neighbor policy".

For example, John Connally , US Treasury Secretary under Richard Nixon , declared in 1971: "The dollar is our currency, but your problem."

"Beggar-thy-neighbor" in the 1930s

The global economic crisis in the 1930s was characterized by restrictive monetary and fiscal policy , devaluation races from September 20, 1931 (when England released the pound from the gold currency standard) and mutual import restrictions (between states) through measures of protectionist customs policy. The downward spiral of devaluation or the Beggar-thy-Neighbor policy caused global economic demand to decline and was one of the causes of the economic depression in the 1930s.

Individual evidence

↑ Der Spiegel, January 11, 2012: Exchange rates: At the expense of others.

↑ Joel Mokyr (Ed.): The Oxford Encyclopedia of Economic History. Oxford 2003. ( online ) P. 249:
"The expression" beggar-my-neighbor "(or" beggar-thy-neighbor ") was defined by Joan Robinson in 1937 to describe international economic policies designed to benefit one nation at the expense of the rest. "

^ "It's our currency, but it's your problem." The "Dollar" Crisis, and Us . By Loren Goldner. Archived from the original on August 30, 2008. Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. Retrieved July 5, 2010. @1@ 2

^ Ulrich Fritsche: Stabilization and structural adjustment programs of the International Monetary Fund in the 1990s. Backgrounds, concepts and criticism. Berlin 2004. ( online ) p. 26.

literature

Otmar Emminger : D-Mark, Dollar, Currency Crises , 1987. ISBN 978-3421063335 .

[1] Der Spiegel, January 11, 2012: Exchange rates: At the expense of others.

[2] Joel Mokyr (Ed.): The Oxford Encyclopedia of Economic History. Oxford 2003. ( online ) P. 249:
"The expression" beggar-my-neighbor "(or" beggar-thy-neighbor ") was defined by Joan Robinson in 1937 to describe international economic policies designed to benefit one nation at the expense of the rest. "