Rather than focus simply on the actual adjustments in the real effective exchange rates which shows the UK and US as having used monetary policy to devalue/weaken their currencies since the 2008 crisis really took shape, we look at an intriguing chart from Nomura's EEMEA FX research team. Google Trends shows, that in the year since Brazil's finance minister Mantega warned of a currency war's immediacy, a dramatic pickup in searches for both 'Currency Wars' and 'Recession' and we believe, like them, that 2012 will see further engagement of the vicious circle of antagonism around the world (with the EUR the obvious next chapter). Only EUR, USD, and TRY are actually weaker since the 2009 lows with most of the Emerging Market over 16% higher on average. It would appear that whether Europe escalates or US retaliates, gold will eventually benefit from this fiat fiasco and the search patterns set a rather nasty precedent.
And the winners and losers from the 2009 equity lows, in FX land (in REER terms):
and comparing UK, US, and Europe from the start of the 2008 crisis. US and UK have been using monetary policy effectively to keep their currencies weak? It is almost a given that Europe will want to join in as the valuation gap between periphery and say the UK is now extreme...
Simply put, you can't grow fast enough, you can't cut rates, that leaves only one option (call it what you want), currency devaluation.