Currency War

From 1870 to 1914 was the golden age of gold standard. International trade transactions was all settled by gold. Since the gold itself doesn't have any sovereignty mark on it, it was the ultimate fair instrument trade between nations. During this time, paper currency was only used in domestic market, and it is exchangeable to equivalent gold weight at a fixed rate. Circulation of paper money supply is regulated at the amount of gold reserved by the nation. There was no manipulation of currency, inflation was almost zero, and employment remained stable. Trade cycle was self corrected by the market force. Function of central banks were very little.

The end of gold standard come right after the end of WWI, with the treaty of Versailles. The war was never end with surrender but an armistice. The treaty was a inter-soverinty parties involved in the WWI to negotiate the peace. England and France seek reparations from German and Austrians. German was asked to cded territory and some industrial capacity at the same time to commit with the financial reparations. This limited the affordability of German to actually meet the treaty. (This was lead to raise of Nazi on later date.) Therefore, it force German Weimar republic at that time to print more worthless paper currency at unprecedented rates to pay the reparation despite gold availability. The devalue currency also make German product become cheaper , therefore hopefully will induce exports to raise. This mark the beginning of manipulation  and devaluation of currency entail hyperinflation and collapse of economic system.

In economy, there are mainly being categorized into several main products, stock market, commodities, bonds. Each of these markets are invert related to others. A stock market crush will make commodities and bonds market more attractive vice versa. However, for all these markets , there underlying value are all based on its own nominated currency. If the currency of a sovereignty collapsed, it will wipe out whole market systems. Such differences between financial market products, and currency; clearly indicate the currency its the ultimate financial weapon. On 1971, with embarkation from Bretton Wood system, gold was out of the picture. International currencies backed by each sovereignty reputation and good wills become the only medium of exchanges between international markets. Economy since was the life blood of any country civilizations, each nations are now on the race to ensure their currency is cheap, to encourage competitiveness in export, to promote surplus in budget and boost employment. However, there never be all nation's currency is cheap. No one want to be the loser in the races. New agenda systematically arise in this new international currency game. Currencies become a new weaponry system for one nations to undermine their counterparts through manipulation, capital control and trade policies

Since 1971s, second currency war has emerged from skirmish into a chaotic global mess. The players now are no longer limited to sovereignty funds, but international corporation and rich hedge funds which many has no national agenda. It was the reason 1997 financial panic that happened through out south east nations, far east nations and south Americans. Again, the events was never affected US, and her dollar faiths in global markets. Lesson was not learned. Then on 2000 onward, 2 new giant currency bloc joined the game, european union and china. The bilateral trade between US and china, and the interdependency of US banking system with European union, had for the first time, put US at the position, not to undermined the treat of currency war to its national interest. Finally, at the end of the first decade of 21 century, with recent events of 2008 financial meltdown, US strike back with a big blow of its currency weapon , QE plans, which forced many its counter trading parties to revalued their currency relative to US dollar or risks uncontrolled inflation risks within their own nations, which could undermine it social stability. This "betrayal behavior" which quoted by many international currency victims nations, of US, had many of her currencies contender caught off-guard. However, such currency war had end come to its end. Unless otherwise there is a more effective international unbiased regulatory body than currently G7 to G20 forums, and a global concession of international currencies solution, the currency war is only going to be uglier and contagious. Such trend will risks the global market melt down, and forcing all nation back to it own individual iron curtain scheme, which will greatly undermined international logistic systems of demand and supply. It risk a total stagnation, worst collapse of social economy system, at international scales.