I could write an entire book on economic myths. One of the most famous is the idea that devaluing your currency steals business away from neighboring countries. This idea, sometimes dubbed “beggar-thy-neighbor,” had a grain of truth during the 1930s. When countries left the gold standard, it led to fears that the remaining countries would devalue. This caused gold hoarding, which was deflationary for the countries with currencies still pegged to gold.
But this theory has no place in the modern world. Every time the Fed eases significantly, the dollar drops. And stock prices rise in our trading partners. Yesterday was a good example:
European stocks advanced, climbing 20 percent from the September low and entering a bull market, after the U.S. Federal Reserve signaled it may keep interest rates low through 2014 and a report said Greece’s creditors will make a new offer for a debt-swap deal.