Switzerland's getting into a currency war with us? Brilliant!

Spend, spend, spend.

It's sort of like the Baader-Meinhof Phenomenon – you hear a relatively rare phrase once, and then it starts springing up all over the place. Today's is "currency war".

At the Telegraph, Ambrose Evans-Pritchard has uncovered evidence that Switzerland and the UK are "effectively fighting a 'low intensity' currency war against each other". He writes:

It seems you can’t debase your coinage these days even if you try.

The Bank of England is straining every sinew to drive down sterling with quantitative easing, and what happens?

The Swiss National Bank trumps Threadneedle Street with an outright blitz of Gilt purchases. They just print it, and buy.

Switzerland is one of the most forthright currency manipulators out there at the moment, as it struggles to hold its franc above 1.20 to the euro. This chart, from the ECB, shows the effect of that fight:

Although currency speculators have been battering at the floor, the Swiss central bank has held to its promise (but it did drop down to 1.1997 francs for a few minutes back in April last year) by buying a metric shittonne (technical term) of eurobonds. Now that it owns so many of those, it is trying to diversify its holdings into other currencies, "allegedly into Aussies, Loonies (Canada), Scandies, Won?, Real? but above all pounds" according to Evans-Pritchard.

The Swiss are doing it because a weaker currency, particularly relative to the Eurozone, is good for them – it boosts deficits and interest rates, both things which ought to keep them out of recession. But we want the same thing. Hence: currency war.

In the US, meanwhile, some economists have argued that America needs to get tough on currency manipulators. The Washington Post's Dylan Matthews writes:

In a new working paper, Joe Gagnon and Fred Bergsten at the Peterson Institute argue not just for import tariffs like those Schumer advocates, but for a full-frontal assault on countries that are manipulating their currencies… Specifically, they want the U.S. to offer the eight worst currency manipulators — China, Denmark, Hong Kong, Korea, Malaysia, Singapore, Switzerland and Taiwan — an ultimatum: Stop manipulating, or else we’ll do the following:

Buy up exactly as many assets in their currencies as they have in ours… tax the earnings from dollar-denominated assets as punishment… treat currency manipulation the same way we treat export subsidies for the purposes of imposing retaliatory tariffs [or] take the manipulators to the World Trade Organization (WTO).

The first of those options is an archetypal currency war. Gagnon and Bergsten argue that making that threat would "currency manipulation, make the dollar less expensive, and thus promote U.S. exports"; the standard refrain of those entering currency wars.

And Matthews offers the standard objection:

The risk is that Gagnon and Bergsten’s policies would only provoke the targeted countries, leading them to respond with still more manipulation and/or tariffs on U.S. goods, setting off a full-fledged currency and trade war that just leaves all parties worse off.

Except that that's not really true (well, the trade war part is). A full-fledged currency war – whether it's between America and all eight of its named "manipulators" or Britain and the Swiss – is indeed a zero-sum game when it comes to the actual level of the currencies. Both GBP and CHF cannot weaken against each other at the same time, definitionally.

But while the war is pointless, the act of fighting it could be a good thing. The Atlantic's Matthew O'Brien writes:

The downside of devaluation is that no country gains a real trade advantage, and weaker currencies means the prices of commodities like oil shoot. But and here's the really important part devaluing means printing money. There isn't enough money in the world. That's the simple and true reason why the global economy fell into crisis and has been so slow to recover. It's also the simple and true reason why the Great Depression was so devastating. We know from the 1930s that such competitive devaluation can turn things around.

War is good if it creates more of something you want. A "charity war" between friends is good because it leads to more donations. A currency war is good because it leads to more money. If war is politics by other means, a currency war is stimulus by other means.

Think of it by analogy to fiscal stimulus. Sometimes, a government decides to do that directly. But just as frequently – say, during the Second World War – it embarks on a massive deficit-funded spending programme because it feels it has to, and it just so happens to be macroeconomically beneficial as well.

So please, Switzerland, keep buying British bonds. It will force the Bank of England into making the moves it ought to have done a long time ago.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
Show Hide image

If the left leaves it to David Cameron, we'll have Brexit for sure

Only an upbeat, leftwing case can keep Britain in the European Union.

After months flapping and hesitation, and with much of the reporting and detail so dull that it has barely penetrated the consciousness of even those who speak the language of ‘directives’ and treaty provisions, the EU referendum is upon us. With David Cameron signalling concrete outcomes for negotiations, we seem to be set for June, whatever the protests from opposition parties about the date being too close to local and national elections.  

Cameron’s deal, whose most substantive element consists of denying in-work benefits to European citizens, exemplifies the kind of debate that Conservative strategists want to create: a tedious, labyrinthine parochialism, blending the EU’s procedural dullness with an unquestioned mythology of the little Englander. Try actually reading the various letters, let alone the draft decisions, that Cameron extracted from Donald Tusk, and the agreement turns to putty in your head. But in summary, what Cameron is negotiating is designed to keep the EU debate as an in-house affair within the right, to continue and formalise the framing of the debate as between two strains of anti-migrant sentiment, both of them backed by big business.

The deal may be reactionary, but it is also mediocre in its scope and impact. The worries that many of us had in the leftwing pro-In camp, that Cameron’s deal would push back freedom of movement and working and environmental protections so far that we would be unable to mobilise for continued membership of the EU, can now be put to bed. Quite the opposite of allowing Cameron's narrative to demoralise us, the left must now seize an opportunity to put imagination and ideas back at the heart of the referendum debate.

The British political landscape in which that debate will play out is a deceptively volatile environment. Party allegiance is at a nearly all time low. Inequality is growing, and so is the gap between attitudes. The backbone of the UKIP vote – and much of the Out vote – will come from a demographic that, sometimes impoverished by the legacy of Thatcherite economic policy, sees itself as left behind by migration and change. On top of the class war, there is a kind of culture war underway in today’s Britain: on one side those who see LGBT rights, open borders and internationalism as the future; on the other side, those who are scared of the future. About the only thing these groups have in common with one another is their anti-establishment instincts, their total disdain and mistrust of politics as usual.

The only political movement to have broken through the fog of cynicism and disillusionment in British politics has come from the left. Jeremy Corbyn’s rise to the leadership of the Labour has unleashed something new - and while large parts of the press, and some Labour backbenchers, have portrayed this rise as a crusade of the “croissant eating” metropolitan elite, the reality is very different. The rise of the new Labour left has given voice to a renewed socialist and working class politics; its explicitly radical, outsider approach has given it traction across the social divides – among the young looking for a future, and among Labour’s old base. 

A politics of hope – however vague that term might sound – is the only real answer to the populist Euroscepticism that the Out campaign will seek to embody. Radical politics, that proposes an alternative narrative to the scapegoating of migrants, has to find voice in the course of this referendum campaign: put simply, we need to persuade a minimum wage worker that they have more in common with a fellow Polish migrant worker than they do with their employer; we need to persuade someone on a social housing waiting list should blame the privatisation of the housing market, not other homeless families. Fundamentally, the real debate to be had is about who the public blames for social injustice: that is a question which only the left can satisfactorily answer.

The outsider-led volatility of British politics gives the EU referendum a special kind of unpredictability. For voters who have lost faith in the political establishment – and who often have little materially to lose from Brexit – the opportunity to deliver a blow to David Cameron this summer will be tempting. The almost consciously boring, business-dominated Britain Stronger In Europe campaign makes a perfect target for disenfranchised public sentiment, its campaigning style less informed by a metropolitan elite than by the landed gentry. Its main weapons – fear, danger and uncertainty – will work on some parts of the electorate, but will backfire on others, much as the Better Together campaign did in the Scottish referendum.

Last night, Another Europe is Possible held a launch meeting of about a hundred people in central London - with the backing of dozens of MPs, campaigners and academics across the country. It will aim to provide a radical, left wing voice to keep Britain in the EU.

If Britain votes to leave the EU in June, it will give the Right a mandate for a renewed set of attacks on workers’ rights, environmental protections, migrants and freedom of movement. But without an injection of idealism and radicalism,  an In vote will be a mandate for the status quo - at home and in Brussels. In order to seize the real potential of the referendum, the left has to approach the campaign with big ideas and demands. And we have to mobilise.