From the Financial Times: Brazil warns of ‘currency war’



Guido Mantega, Brazil’s finance minister, said on Monday the world was in an “international currency war” ... Mr Mantega, who has made increasingly aggressive comments recently about the need to control Brazil’s currency, said governments around the world were trying to weaken their currencies to promote competitiveness.



"We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness,” he said ...

excerpt with permission

Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it's worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.

I want to be absolutely clear that I am today neither forecasting nor recommending any attempt by U.S. policymakers to target the international value of the dollar.

It seems everyone wants to devalue to export more.As a reminder, Bernanke touched on devaluation in his well known 2002 speech: Deflation: Making Sure "It" Doesn't Happen Here Bernanke also said in 2002:Of course a lower dollar only helps U.S. competitiveness with countries not pegged to the dollar - and not intervening in their currency. It sounds like Brazil might be intervening soon.