But it isn t just importers who are blocking real devaluation.

This reflected a decrease in real terms, due to inflation and the devaluation of the dollar.

This reflected a decrease in real terms, due to inflation and the devaluation of the dollar.

But real devaluation, achieved by lowering prices vis à vis their eurozone competitors, is the only way to re establish these countries competitiveness.

During the 1998 financial crisis, devaluation would have hurt those who owned local real estate but had little earnings or assets in US dollars.

America s foreign creditors would not accept a sharp reduction in their dollar assets real value that debasement of the dollar via inflation and devaluation would entail.

The Value of China s Devaluation

Devaluation and debt restructuring worked.

The latest Eurostat figures on the evolution of the price index for self produced goods (GDP deflator) show no tendency whatsoever in the crisis stricken countries towards real devaluation.

But internal devaluation requires debt restructuring.

But, since none of these countries has a national currency to devalue, they must substitute internal devaluation for external devaluation.

Even today, four years into the crisis, there are no signs that the overly expensive countries in Europe s southern periphery have begun devaluation in real terms by cutting wages and prices.

They are united in ruling out external devaluation.

In a monetary union, there are only two ways to close a competitiveness gap between countries transfers from the more competitive to the less competitive, or internal devaluation, which means real wage cuts.

The alternatives on offer are internal and external devaluation.

Eurozone membership precludes inflation and devaluation as adjustment mechanisms.

But this is not true. Budget discipline will work only insofar as it drives the country into a depression and induces a real devaluation through a reduction in wages and prices, which is option two.

Devaluation is not an option because of the common currency.

A slight devaluation would solve any remaining problem with export demand.

One way is as part of America s strategy of competitive devaluation.

But, the devaluation was much less important than is widely assumed.

China s real motivation seems to be more far sighted. The devaluation advanced China s strategic goal of turning the renminbi into an international reserve currency and, in the long term, into a credible global challenger to the US dollar.

Greece is heading towards disorderly default and or devaluation with incalculable consequences.

Now, however, the specter of devaluation has disappeared from northern European countries.

The first major shock came with Russia's default and devaluation of August 1998.

Vicious circles of economic instability, devaluation, and capital flight have brought down seemingly unbreakable regimes throughout history. This probably explains the whiff of panic that followed China s tiny, but totally unexpected, devaluation of the renminbi.

Even China s vast reserves will not be enough to stave off a painful devaluation.

The standard way to buffer the effects of austerity is to marry domestic cuts to devaluation of the currency. Devaluation renders exports more competitive, thus substituting external demand for the domestic demand that is being compressed.

But it isn t just importers who are blocking real devaluation. Unions, too, are resisting the necessary wage reductions, and public and private debtors fear the prospect of insolvency if their assets and revenues are assessed at a lower value, while their debts remain unchanged.

By 2001, a combination of devaluation (exit from the currency straitjacket) and partial default was inevitable.

But the impact is severely limited without external devaluation, which is impossible within a monetary union.

In China s view, it is not enough merely to require others to accommodate themselves to dollar devaluation.

Devaluation renders exports more competitive, thus substituting external demand for the domestic demand that is being compressed.

The result is that the process of internal devaluation, as economists call it, is occurring very slowly.

Manifestations of discrimination include high instances of child and bonded labour, unequal pay, unemployment and emotional devaluation.

If internal devaluation were the solution, the gold standard would not have been a problem in the Great Depression. Internal devaluation, combined with austerity and the single market principle (which facilitates capital flight and the hemorrhaging of banking systems) is a toxic combination.

During the first part of the decade, intervention was motivated by the desire to avoid devaluation, and therefore to support the inflation targeting objectives. However, in later periods the objective was to avoid real exchange rate appreciation, and, at the same time, to accumulate international reserves and strengthen credibility.

Devaluation of the dollar could improve US competitiveness in the short run, but it is not a solution.

One proposed solution is for these countries to engineer the equivalent of a devaluation a uniform decrease in wages.

Lacking well developed industrial production and intra community trade, devaluation brought them higher import prices, inflation, and rising unemployment.

The standard way to buffer the effects of austerity is to marry domestic cuts to devaluation of the currency.

In early 2013, the government was forced to announce a 32 devaluation, and stopped issuing government debt in dollars.

During the Asian financial crisis of 1997 1998, Chinese officials did not engage in competitive devaluation of the renminbi.

Adjustment mechanisms are needed, but external devaluation and inflation are not available, while labor mobility is partial at best.

If internal devaluation were the solution, the gold standard would not have been a problem in the Great Depression.