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1、One more such victoryThe emerging economies are winning the currency war. No one is celebratingOct 1st 2011 | from the print edition Tweet A YEAR ago Brazils finance minister, Guido Mantega, declared that the world had entered into a “currency war”. He worried that in a depressed global economy, wit
2、hout enough spending to go around, countries would sally forth and grab a bit of extra demand for themselves by weakening their currencies. The dollar, for example, fell by 11% against Brazils real in the year to August 2011, much to the chagrin of Brazils manufacturers. Like other emerging economie
3、s it fought back by imposing taxes and other restrictions on foreign purchases of local securities. In this sectionOne more such victory The won that got away Holey grail Mood swings Money and politics The blizzard from Brussels Abacussed Tinker, tailor Reprints-Related topicsEurope The dollar Unite
4、d States Public finance Government and politics But the invasion of foreign capital that so worried Mr Mantega has now turned into a shambolic retreat. The outflows have dragged down the exchange rates of almost every emerging economy since the beginning of August (see chart 1). Having spent much of
5、 the past year fretting about their currencies rise, central banks across the emerging world have now intervened in the markets to slow their currencies fall. In a currency war, where each side fights to gain competitiveness against the others, these tumbling exchange rates presumably count as victo
6、ries. But they are Pyrrhic.That term originates with the GreeksPyrrhus was a Hellenistic general whose victories against Rome came at a grievous cost to his own side. The Greeks are also partly responsible for more recent reversals. As the government in Athens teeters on the brink of default, invest
7、ors have begun to doubt the creditworthiness of other euro-zone governments, as well as the banks that lent to them. The gathering unease has left global investors less willing to tolerate the risks associated with volatile emerging economies.Indeed, some are unwilling to tolerate risks of any kind
8、(see Buttonwood). They are accumulating cash by selling other assets, from gold to Thai equities, more or less indiscriminately. An index of emerging stockmarkets prepared by MSCI has fallen by over 20% since August 1st, despite a rally on September 27th. The worry now is that bonds will follow suit
9、. Foreign investors hold a third of the local-currency debt issued by Indonesia, Korea, Malaysia, Mexico, Poland and Turkey. In a conference call, Bhanu Baweja of UBS worried that the stomach-churning developments in Europe and America might prompt these investors to “puke” up their bondholdings.A c
10、heaper real, zloty and rupee will help emerging economies win a bigger share of global spending. But that is small consolation if global spending declines. The volume of exports from Latin America and Asia did not surpass its pre-crisis peak until the first quarter of this year, according to the Net
11、herlands Bureau for Economic Policy Analysis. And foreign sales are bound to fall again as America stagnates and a two-speed Europe converges on a single, slower pace.Falling export orders was one of the complaints voiced by Chinese manufacturers in a preliminary survey of purchasing managers publis
12、hed by HSBC last week. The survey showed manufacturing shrinking from the month before (see chart 2), adding to the gloom on world markets. But HSBCs China economist, Qu Hongbin, believes GDP will still grow at an annual pace of 8.5-9% in the second half of this year. Chinas economy is not as depend
13、ent on exports as it was, he points out. International trade (exports minus imports) contributed a little less than nothing to the countrys growth in the first half of this year. And imports have remained strong: in the traumatic month of August, China imported 30% more (in dollar terms) than it bou
14、ght a year before. These imports included iron ore and other materials destined ultimately for Chinas construction industry, which has become a mainstay of the economys growth, but also a headache for its policymakers. To quell property prices, the government is trying to starve real-estate develope
15、rs of financing. First, it restricted bank lending; now it is removing trust-company financing from the menu. But even as it curbs the top end of the property market, the government is urging local authorities to build affordable housing. Bricks are still being laid, even if less profit is being mad
16、e. Homebuilding is surprisingly buoyant (housing starts increased by 32% in the year to August), even as home builders take a battering on markets.If the world economy were to collapse, emerging economies have scope to ease policy. Michael Buchanan and his colleagues at Goldman Sachs calculate that emerging Asia could
