Heli Ben: The dollar is our currency, but your problem.

If US monetary policy eases further, it will get the exchange rate depreciation that it wants. It will indeed win the currency wars. Conventional wisdom is wrong: The US can, after all, devalue the dollar. But there are costs:




* A wave of trade protectionism is not excluded, although its probability is low;

* More likely are capital account protectionism, in the form of emerging market capital controls; and

* Damaging exchange-rate volatility, including among the large countries, if QE is not coordinated (simultaneous).



Moreover, in the longer run, this could substantially weaken the hegemony of the dollar in the international financial system.