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
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Who will win the Copeland by-election?

Labour face a tricky task in holding onto the seat. 

What’s the Copeland by-election about? That’s the question that will decide who wins it.

The Conservatives want it to be about the nuclear industry, which is the seat’s biggest employer, and Jeremy Corbyn’s long history of opposition to nuclear power.

Labour want it to be about the difficulties of the NHS in Cumbria in general and the future of West Cumberland Hospital in particular.

Who’s winning? Neither party is confident of victory but both sides think it will be close. That Theresa May has visited is a sign of the confidence in Conservative headquarters that, win or lose, Labour will not increase its majority from the six-point lead it held over the Conservatives in May 2015. (It’s always more instructive to talk about vote share rather than raw numbers, in by-elections in particular.)

But her visit may have been counterproductive. Yes, she is the most popular politician in Britain according to all the polls, but in visiting she has added fuel to the fire of Labour’s message that the Conservatives are keeping an anxious eye on the outcome.

Labour strategists feared that “the oxygen” would come out of the campaign if May used her visit to offer a guarantee about West Cumberland Hospital. Instead, she refused to answer, merely hyping up the issue further.

The party is nervous that opposition to Corbyn is going to supress turnout among their voters, but on the Conservative side, there is considerable irritation that May’s visit has made their task harder, too.

Voters know the difference between a by-election and a general election and my hunch is that people will get they can have a free hit on the health question without risking the future of the nuclear factory. That Corbyn has U-Turned on nuclear power only helps.

I said last week that if I knew what the local paper would look like between now and then I would be able to call the outcome. Today the West Cumbria News & Star leads with Downing Street’s refusal to answer questions about West Cumberland Hospital. All the signs favour Labour. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.