Topic 1: Currency Devaluation Background: Historically, devaluation of a currency referred to its relationship to gold.

Gold could not be expanded in any appreciable amounts very quickly. Today, paper money can be made very quickly and as much can be made as desired. Modern devaluation advocates refer to the currency's value, or exchange ratio, in relation to all other fiat currencies. The exchange value between currencies is governed by purchasing-power parity, which is the simple comparison of the price levels of two countries as expressed in local currency. Competitive currency devaluation involves a countrys effort to become more competitive on an international level by lessening the value of its currency. With a devalued currency, a countrys exports become cheaper to countries with other, stronger currencies. By devaluing currency, a countrys commodities become more competitive in the global market. Despite the apparent attractive qualities that devaluing currency has, it can also have negative effects that should not be taken lightly. Many economists recognize the risks that currency devaluation causes, and that by making imports more expensive, some businesses within the country can become less efficient. Also, once one country devalues their currency, other countries tend to follow suit in order to maintain their economic standing, which can cause inflation.

Analysis of the Current Situation Today, eighteen of twenty-seven EU countries use the euro. While some countries are considering joining the Eurozone, others are considering an exit. Spain, Italy, and Portugalall on the eurocurrently face difficulties due to high labor costs: these costs have caused the countries to become less competitive internationally. Any one of these countries cannot devalue the euro on its own, which begs the question: how can their economies be improved? Some argue that devaluing the euroan action that could only be taken by the EUmay be the best solution. The emerging market currency crisis is being propelled by policymakers who are seeking the easy answer by devaluing their currency, which is an unsustainable global model, Saxo Bank CEO Steen Jacobsen told RT. Countries such as South Africa, India, and Russia are having an incredibly hard time keeping their currencies free-floating against the dollar and the euro. 2013 was one of the worst years ever for the Indian rupee, and the Turkish lira and the Mexican peso also had substantial dips. Devaluation is being fueled by policymakers in emerging markets. In an effort to make the ruble a free-floating currency, the Russian central bank is cutting its monetary intervention and increasing the boundaries of a currency corridor, which is sending the currency to record lows against both the euro and the dollar.

Bloc Positions China, United States, Japan Some argue that the currency war has gone in the favor of the US and China, as both of these countries were maintaining their currencies values while increasing the values of other currencies, like the euro and the yen. When a country devalues its currency to lead to more exports, it may steal its trading partners growth, according to James Rickards. This leads to currency war. Although China and the US might be both labeled as winners in this war, conflict between the two countries over the valuation of the yuan has begun. The US has pressured China to let the Yuans value increase, but China may benefit more if its value stays lower. The Bank of Japan doubled its inflation target to 2 percent in January and made an openended commitment to continue buying assets from next year. This follows a leadership change, with new Prime Minister Shinzo Abe openly calling for aggressive monetary stimulus from the country's central bank.

India, Mexico Indias currency has taken a beating in recent years due to other countries such as the United States devaluing their currency. The rupee has lost more than 15% of its value in recent years. Mexicos economy has also not been able to keep up with the devaluing of currency, and has taken a hit in recent years. Mexico knows the harsh effects of currency devaluation all too well, their economy collapsed in the early 1990s largely in part to inflation and a sudden drop in the value of the peso.

Europe Some more struggling countries may certainly favor currency devaluation as a means of bringing them out of their dire straits. Germany, and other countries that have high labor costs may prefer not to devalue their currency, to ensure that the success brought on by that cheap labor continues. Remember that not all European countries use the euro.

Questions to Consider: 1. Should currency devaluation be allowed? 2. If not, what should the consequences of devaluation be? 3. What are the postive effects of currency devaluation? 4. How is your countrys economy affected by currency devaluation?

Works Cited: http://www.economicshelp.org/dictionary/c/competitive-devaluation.html http://www.kmun.net/kmun/index4.php?page=programmes_uni http://www.reuters.com/article/2010/10/18/us-usa-dollar-geithner-idUSTRE69H4VO20101018 http://articles.businessinsider.com/2011-01-19/markets/30048465_1_yuan-devaluation-china http://news.heartland.org/newspaper-article/2012/06/05/there-no-value-currency-devaluation http://rt.com/business/devaluation-currency-not-easy-420 http://geography.about.com/od/lists/a/euro.htm

http://www.cnbc.com/id/100441340 http://www.caseyresearch.com/cdd/folly-competitive-currency-devaluations http://online.wsj.com/article/BT-CO-20120531-706596.html http://www.usnews.com/opinion/blogs/economic-intelligence/2012/02/13/the-silent-victims-ofthe-us-chinese-currency-war http://en.wikipedia.org/wiki/Currency_war http://www.businessinsider.com/how-currency-wars-affect-global-markets-20129#ixzz2AokkAR4T https://www.brickworkindia.com/blog/devaluation-of-inr-is-it-good-or-bad/ http://www.investopedia.com/terms/d/devaluation.asp