schuster currency war_20101027

Currency War as a

Trade Political Tool

Guest Lecture

at Haaga-Helia University of

Applied Sciences

27th October 2010

Prof. Dr. Thomas Schuster International University of Applied Sciences

Bad Honnef ∙ Bonn

Outline of the lecture

• Battelfields of the war

• Attackers and victimes involved in the war

• Economic background

• Suggestions to make peace

Prof. Dr. Thomas Schuster Currency War International University of Applied Sciences WS 2010/2011 2

Questions about the currency war

• Who is the attacker?

• Who is the victim?

• What is the accusation?

• Are any countermeasures taken by the

victim?

3 Prof. Dr. Thomas Schuster Currency War International University of Applied Sciences WS 2010/2011

China‘s Undervalued Currency

4

Source: The Economist (2010)

Prof. Dr. Thomas Schuster Currency War International University of Applied Sciences WS 2010/2011


5

Source: finance.yahoo.com (2010)



6

Source: finance.yahoo.com (2010)


U.S.‘s Quantitative Easing


U.S.‘s Quantitative Easing

8

Source: www.tradingeconomics.com (2010)


Developing Countries‘ Capital

Controls

9

• Why do countries like Brazil or Thailand

introduce capital controls or make it

more difficult for foreigners to buy their

currency?


Suggestions to make peace

• China should completely change to the free floating

exchange rate regime

• U.S. should watch inflation rate carefully and increase

federal funds target rate if necessary

• U.S. should not impose tariffs on Chinese products

• Developing countries should not impose capital

controls or taxes on foreign investment

They need the capital to expand business and to stay

competitive


schuster currency war_20101027

Economy & Finance