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Subject:  Re: Devaluation qustion Date:  5/28/2003  6:08 AM
Author:  jiml8 Number:  6526 of 10591

Thanks for cheering me up. But, since the value of currency is onl7y relative to the value of other currency, wouldn't it all just net out?

Couldn't net out. After all, devaluation is a relative effect. If everyone devalues together, then literally nothing has happened. So, if a "devaluation war" gets started, as you suggested, the result inevitably would be turbulence.

Things around the world are rather fragile right now; turbulence could not be good. Would make for some great arbitrage plays for the properly positioned person, though.

I suspect that the effect of such a war would be to reduce the flow of capital, which implies reduction in trade. In a global economy, that couldn't possibly be good.
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