We’re in the midst of an international currency war, a general weakening of currency. This threatens us because it takes away our competitiveness.
—Guido Mantega, Brazilian finance minister, September 27, 2010
Low rates and weak currencies in China and the United States pushed money toward other emerging countries and kept the euro unnaturally strong. That exported inflation to the emerging world, and left Europe uncompetitive.
In November 2008, China announced a “moderately active” monetary policy that soon turned out to be hyperactive. State-controlled banks tripled new lending in the first half of 2009, compared to the first half of 2008—an explosion in credit almost certain to create overheating. The Chinese authorities ...