Despite the truce that G20 countries made this weekend agreeing not to devalue currencies to tackle financial imbalances, some fear the US has been long involved in a currency war.
The US has waged well-known wars in Afghanistan and Iraq. Yet some say it is also waging a lesser-known battle that is just as costly and much larger in scale.
"The US is leading a financial world war to obtain foreign resources and essentially make other countries pay tribute to it,” Michael Hudson, contributor to the Financial Times, told RT.
It is a war that is being fought not with force but with credit, as the US Federal Reserve continues to print and pump billions of dollars into the economy.
“The Fed Reserve had a balance sheet of $850 billion and that shot up to $2.1 trillion,” said The New School economist, Max Fraad Wolff.
More than $1.5 trillion has been spent buying bonds and home mortgages from banks in the last two years in an effort to try and prop up the US economy. The policy – called quantitative easing – is supposed to stimulate the economy, lowering interest rates and enabling banks to lend more. However, it has not exactly helped the average American.
“For households in trouble it has been very difficult and remains very difficult to get any access to any money,” said Wolff. “So the quoted prices are low but if no one will make a loan to you, it doesn’t matter very much."
“If the US sets interest rates very low and tries to open large routes to lending, then American corporations take money, borrow money and go all over the world and buy things," Wolff added.
Businesses and investors from the world’s largest economy are firing off rounds. Whether it’s on real estate in China or farmland in Australia, the money leaves the US, because low interest rates
mean investors aren’t getting much return on assets at home.
“This puts inflationary pressure on other countries. You have seen Brazil react to that. You have seen China react to that. You have seen South Korea react to that,” said Wolff. “And this does tend to push up prices of assets people buy."
The reason why this should concern an average American is because the things that speculators like to buy usually include soft commodities such as wheat, soybeans, and sugar. But when they pour their money into these goods, the global price of food skyrockets.
Meanwhile, the process continues to drive down the price of the dollar, the international reserve currency, and pushes other currencies’ values up.
"The currency war is going on in the developed economies already," economic analyst Edward Harrison said.
Developing countries who have felt the effect of foreign investment have already voiced their concerns.
“You are exporting your deflation, your lack of consumption demand, on to us by using beggar-thy-neighbor policies that are ultimately stealing from our economies, making our economies worse-off over the long term," Harrison said.
However, countries affected by the flood of US dollars have begun to take steps to protect their currencies and their exports from getting more expensive. And US policy makers are rattling their sabers at the IMF and G20 meetings which call for other countries to let their currencies rise, with no mention of the declining dollar.
"There is no doubt in my mind that the leaders of this country, who think very much in terms of power and even empire, want to keep it that way," said Mark Weisbrot, Co-director of the Center for Economic and Policy research.
But as the US appears poised to fire off a new round of quantitative easing, the rest of the world is fighting back.
“Instead of having a multi-polar world led by the IMF and the World Trade Organization with a heavy influence from the US government and US treasury, we are seeing lots of governments going around the world cutting two-party deals," Wolff said.
These deals, which stretch across Asia, Latin America and Eastern Europe, are usually made in local currencies, in an effort to fight against the declining reserve currency, and, what some call, the US’s losing battle.