The world is in a currency war but it didn’t start yesterday or last month despite the screaming headlines about China’s devaluation. The currency war started in January 2010 as a result of Obama’s State of the Union Address.

Obama called for a New Economic Policy that would double U.S. exports in five years. This was a course of action agreed at the G20 Leaders’ Summit held in Pittsburgh in September 2009.

Of course, the only way to double exports in five years given constraints on labor and productivity is to cheapen the U.S. dollar. That’s exactly what happened.

By August 2011, just 18 months after Obama’s address, the dollar hit an all-time low. My 2011 book Currency Wars describes this sequence of events in detail. The currency wars are going strong today, but that’s no surprise. Currency wars easily last 15–20 years because they have no natural end point until there is a monetary conference (such as the Plaza Accord) or a monetary collapse.

Despite this long history and high impact, many elite multilateral institutions are just now waking up to the dangers. The latest to join the club is the International Monetary Fund, which just issued a paper on the topic of currency wars, as described in this article.

It’s unclear why the IMF waited so long to sound the alarm. One reason may be that the IMF is pro-China and China has been the biggest winner in the currency wars for the past decade. Now that China is in danger of suffering retaliation by the U.S., the IMF is busy warning the U.S. to back off. Too late.

The time to sound the alarm was at Pittsburgh in 2009 when the currency war approach was cooked up by Obama and others. Now that the currency wars are in full swing, no relief should be expected until a convening power calls for a new conference or until there’s a monetary collapse.

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