Currency wars whats next

Marxist Analysis · 2026-05-13

Core Argument¶

The article argues that the world economy in 2010 was entering a phase of intensifying inter-imperialist rivalry expressed through currency manipulation and competitive devaluation — a "currency war" that mirrors the beggar-thy-neighbour policies of the 1930s. The central claim is that this is not a policy error or a failure of coordination, but an inevitable expression of capitalism's structural impasse: overaccumulation, excess productive capacity, and the dominance of fictitious capital have made the nation-state framework and private ownership a fetter on the productive forces. Each capitalist power attempts to export its crisis onto rivals through devaluation and protectionism, but since not all can succeed simultaneously, the result is a race to the bottom that threatens to tip the global economy into a new depression. The article positions currency wars as the surface manifestation of deeper contradictions — the divorce of financial speculation from real production, the limits of national solutions in a globalised economy, and the inability of the ruling class to manage capitalism's crisis without turning on itself.

Theoretical Grounding¶

The analysis draws on Marx's distinction between real and fictitious capital, and on the Marxist theory of crisis rooted in overaccumulation and the falling rate of profit. The concept of "fictitious capital" — paper wealth not backed by real value — is deployed to explain the staggering scale of derivatives and currency trading relative to world GDP. The argument that "without real production there is no value" anchors the critique of financialisation in Marx's labour theory of value. The article also draws on Lenin's theory of imperialism, particularly the notion that inter-imperialist rivalry intensifies as the world market is carved up and the possibility of peaceful expansion closes. The reference to the 1930s situates the argument within the Marxist tradition's analysis of the Great Depression as a crisis of overaccumulation that could only be resolved through war or revolutionary rupture. The rejection of Keynesian or reformist solutions — such as coordinated rebalancing or managed exchange rates — is implicit throughout: the article treats currency wars as structurally determined, not a failure of policy wisdom.

Conjunctural Relevance¶

The article was written in October 2010, at a specific conjuncture: the aftermath of the 2008 financial crisis, the first round of quantitative easing in the US and UK, and the beginning of the eurozone sovereign debt crisis. Key data points include: - Daily foreign exchange turnover reaching $3.2 trillion in 2007, with derivatives totalling $596 trillion — eight times world GDP. - Central banks in South Korea, Malaysia, Indonesia, Thailand, and Taiwan collectively purchasing $28.74 billion in a two-week period to stem currency appreciation. - The US dollar falling 6% from the start of September 2010, with gold and silver prices surging as speculators sought safe havens. - Japan spending $25 billion in a failed attempt to weaken the yen. - The US House of Representatives voting on legislation to block Chinese imports in retaliation for an undervalued renminbi.

The article names specific actors: the US Federal Reserve (pursuing quantitative easing), the People's Bank of China (defending the dollar peg), the Brazilian finance minister Guido Mantega (who coined "currency war"), and speculators like George Soros. It identifies the key geopolitical tension as US-China rivalry, with Europe oscillating depending on the euro's strength. The conjunctural claim is that the "phoney war" of 2010 could escalate into a full-scale trade war, threatening a new depression — a prediction that proved prescient given the subsequent trade conflicts of the Trump era.

Where the Argument Continues¶

The article is a snapshot of a specific moment, and the argument continues in several directions within the IDOM corpus:

On the eurozone crisis: The reference to Europe being "firmly in the doldrums" and the euro's role as a reserve currency points to the sovereign debt crisis that exploded in Greece and spread to Ireland, Portugal, Spain, and Italy. IDOM articles from 2011-2012 on the eurozone crisis develop the analysis of inter-imperialist rivalry within the EU, particularly German dominance and the subordination of peripheral economies.
On US-China trade war: The article's warning about tit-for-tat protectionism and the Schumer-Graham tariff plan anticipates the full-blown US-China trade war under Trump. Later IDOM articles on the trade war, the decoupling of supply chains, and the technological rivalry (Huawei, semiconductors) extend the analysis.
On financialisation and fictitious capital: The argument that "financialisation builds crisis and instability into its very foundations" is developed in IDOM articles on the 2008 crash, the role of derivatives, and the growth of private debt. The concept of "surplus liquidity" searching for profitable investment is a recurring theme.
On the limits of national solutions: The article's insistence that currency wars are a symptom of capitalism's structural impasse, not a policy failure, is a thread running through IDOM's analysis of trade wars, protectionism, and the failure of G20 coordination.
Against the Stream episodes: The podcast has covered currency wars, the dollar hegemony, and the geopolitics of devaluation in several episodes, particularly in the context of the Ukraine war and sanctions, and the rise of de-dollarisation initiatives.

Connections¶

Marx, Capital Vol. 3: The distinction between real and fictitious capital, the tendency of the rate of profit to fall, and the analysis of credit and banking are the theoretical foundations.
Lenin, Imperialism, the Highest Stage of Capitalism: The theory of inter-imperialist rivalry, the export of capital, and the division of the world market.
Trotsky, The Transitional Program: The argument that the productive forces have outgrown the nation-state and private property is central to the Marxist case for socialist revolution.
IDOM articles on the 2008 crash and the Great Depression: The article explicitly invokes the 1930s; IDOM's series on the Great Depression (e.g., "Lessons of the 1930s") provides historical depth.
IDOM articles on the eurozone crisis: The dynamic of German export dominance and peripheral austerity is a continuation of the currency war logic within the single currency.
IDOM articles on US-China rivalry: Later analyses of the trade war, technology decoupling, and the South China Sea extend the geopolitical dimension.
Keynes, The Economic Consequences of the Peace: The article implicitly critiques Keynesian solutions to currency wars, though Keynes's own warnings about the Versailles treaty's economic nationalism are a useful parallel.

Key Quotes¶

"With all the excess capacity throughout the world economy, the capitalists are investing their money in anything but production. This again shows the limits of capitalism where the productive forces have outgrown the nation state and private ownership of the means of production."
"The world is awash with 'surplus liquidity' – money capital searching for profitable investment. Why invest in industries already saturated with overproduction, when you can speculate in currencies and make billions?"
"Colossal amounts of fictitious capital (paper wealth not backed by real values) are sloshing around the world economy like loose cargo on the deck of a ship, knocking holes in the sides at every turn."
"The total value of derivatives was $596 trillion — 8 times the real economy. The total currency traded was $1,168 trillion or 17 times world GDP. The bulk of this is clearly fictitious capital as it is not backed by real collateral."
"This increased antagonism arises from the dire economic situation on a world scale, with every country attempting to escape its problems by boosting exports. They want their competitors to take on the burden. Clearly, not everyone can do this at the same time but still they persist."
"The ruling classes are tobogganing to disaster with their eyes closed."