From economics 101, a weak currency versus say the USD will help the countries export sector. Right now the world is at a point where every country wants their currency to weaken to improve trade surpluses.
The first step was taken today as the Bank of Japan has announced currency intervention.
The bloomberg article is here
Zerohedge has an article here
Below is taken from Zerohedge article which demonstrates the effect of such intervention.
This is Japanese version of QE2, so what happens when the US debase the USD? Well Japanese Yen will strength again against the greenback, which pave the way for MORE intervention. You can see how this could end up being a slippery slope, which has the potential to lead to a currency war.
The markets in Asian accordingly SOARED, which is what you would expect. This is another reason why the QE2 from the US will coincided with a low in the markets with the hope to give it a boost.
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