User talk:Sreybruney1/sandbox
The Impacts of Currency Manipulation on International Trade
Sreybruney1 (talk) 03:18, 28 April 2018 (UTC)
Currency manipulation happens when a nation misleadingly increases or decreases its exchange rate.[1] One way a nation can depreciate its currency is to print more money, and afterward, utilize that new money to purchase foreign debt and foreign currency. This builds the supply of the currency in the nation printing money and thereafter decreases the value of its currency while intern decreasing the supply of the target country’s currency. This results in a rise in the value of the currency which was purchased.
History Of Currency Manipulation[edit]
Currency manipulation was observed by Harry Dexter White.[2] Currency manipulation was the source of trade wars which lead to the introduction of rules against the practice and to prevent unfair advantages in international trade. According to White “Given the choice, every country prefers to have its currency undervalued rather than overvalued.” Truth be told, currency manipulation assumed a critical part in introducing the Great Depression, as nationalistic currency wars expanded the quick drop of a frail worldwide economy.
It is assumed that currency manipulation played a huge role in mercantilist trade policy which was popular among European countries in the 15th and 18th century. By the late 1960’s Western Europe and Japan managed to significantly increase the U.S trade deficit entirely through the devaluation of their own currency.
Impacts on International Trade[edit]
Amongst all effects of currency control, the most prominent is the creation of unfair trade advantages. A devalued currency diminishes the cost of exports, therefore dominates the international market, subsequently crowding out rival countries. One sector in which the impacts of currency manipulation is most prevalent is within the computer/electronics sector. The US has resorted to the importation of electronics and intermediary goods for the production of computers from China, which is a cheaper alternative to domestic production. [3]