A disturbing aspect of today’s global international economic order is a seeming lack of rules to restrict the degree to which a country’s central bank can manipulate its currency for competitive advantage. This has long been a problem with the Chinese central bank, which has routinely engaged in massive foreign exchange market intervention to prevent the appreciation of the Chinese renminbi in order to keep Chinese exports artificially cheap. However, more recently currency manipulation appears to have become an even more serious problem as the world’s major central banks have expanded their balance sheets on a scale that has no historic precedent with the ostensible purpose of supporting their countries’ domestic economic recoveries.
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