We are all aware of the current situation concerning China's valuation of the Yan. Being accused of keeping the value low withe respect to the dollar and euro. But they are not the only players in this currency dispute by a long shot. Japan, which has been hit hard by the economic down turn, is also trying to devalue it's currency so as to increase exports.

On Wednesday, Japan unilaterally intervened in currency markets to drive down the exchange rate of its currency by selling an estimated 1 trillion yen (worth some $20 billion). The move, the first such intervention by Japan in more than six years and the country's biggest ever one-day currency action, breached a tacit agreement among the established industrial powers to avoid unilateral currency moves.

Japan had threatened such action after the value of the yen in relation to the dollar rose by more than 10 percent since May. The Japanese currency also climbed sharply in relation to the euro and the Chinese renminbi. Tokyo, heavily dependent on exports, had warned that it would take action to protect its industries from the negative effect of the yen's rise on its ability to sell goods abroad.

The following day, US Treasury Secretary Timothy Geithner testified in two separate congressional hearings on Chinese currency policy and demanded that Beijing allow its currency to rise faster and more steeply, tacitly threatening retaliatory action if the Chinese regime refused to do so. Congressmen and senators from both parties blamed China for the loss of American jobs and criticized the Obama administration for failing to officially declare China a "currency manipulator" and impose tariffs and other penalties on Chinese exports to the US.

The eruption of currency exchange conflicts is bound up with mounting signs that the global economic crisis is systemic, rather than merely conjunctural, and growing fears that a genuine recovery is not in the offing. The European sovereign debt crisis and the weakening of US economic growth have led governments around the world to seek to secure a greater share of export markets. Under conditions of slowing growth and stagnant markets, this inevitably heightens trade conflicts between competing capitalist nations.

In particular, the US and the European Union, spearheaded by the export power Germany, have aggressively pursued a cheap currency policy in order to gain a trade advantage against their rivals. Of the major economic powers, Japan has suffered the greatest damage from these policies, as investors and speculators have shifted from dollar- and euro-denominated investments to the yen, driving up the currency's exchange rate.

This has embittered relations between Japan and both the US and the EU. Japan has also denounced China for artificially keeping its currency low while bidding up the yen by increasing its purchases of Japanese government securities.

With Europe, China, Japan and Russia all trying to crawl out of the current economic slump and doing so by increasing exports, the currency wars may be just heating up. But this is just a symptom of an even wider problem.  Making ones exports more cost competitive can only work if the vast majority of people can afford to purchase them.  But with unemployment at an all time high, not just here but in other countries as well, there is not sufficient market for the goods.
It is truly a vicious circle.