Having finally gotten over the juicy term "currency war" the popular press is starting to understand the implications of competitive devaluation, beggar-thy-neighor policies and currency wars. Use the Large Open Economy Mundell Fleming Model to explain the apparent impotence of Central Banks around the globle.
Ken Rogoff has a great piece on the Chinese FX dilemma: How can a country with a fixed exchange rate, very very little capital mobility, and a huge Current Account surplus be running down its reserves? Try it in the MF model – but think about how Risk affects the Financial Account!
The idea was that the US would "Inflict Pain on Chinese Solar Manufacturers" (who gains who looses?)
Turns out things aren't all that easy in the world of trade and retaliation: a few month later not only the Chinese but also WA manufacturers felt the pain as WA Solar Plants have to shut down because of the trade war with China over solar panels. Even the WA governor is intervening, WA is providing massive subsidies to the Solar energy, just like the Chinese.
But wait there is more. New fronts on the trade war have been opened with India as Europe also enters the fray (Europe's case has since been resolved "amicably"). Here is the background that outlines the case
