The "Currency Wars" Wars Heat Up by Yglesias

Yglesias links to Greg Ip who I linked to below.

The clear implication of the term “war” is that these policies are zero-sum games: America and Japan are trying to push down their currencies to boost exports and limit imports, and thereby divert demand from their trading partners to themselves.

(Not totally clear on this.) China was doing this with its "currency manipulations" because it was buying U.S. Treasuries and has "capital controls." Japan has said it won't intervene in foreign exchange markets to lower its currency. Also Japan is supposedly now in surplus (need to check) while China's currency has strengthened (need to check). In any event emerging markets like Brazil should institute limited capital controls to regulate hot money and make sure they don't end up like Spain.

Part of the problem is the domestic politics of each country. China is allowing the U.S. to borrow cheaply in order to subsidize its exporters. The U.S. should use the cheap money to "invest in the future" and close the output gap. Republicans are blocking this. (But if China didn't have capital controls, money would be flowing in and strengthening their currency and they would get more inflation and would have to borrow more from the U.S. Again not crystal clear on the arguments.)