Rogues and renegades

The Wall Street Journal warns of the dangers of the current “exchange rate wars”, while the Financial Times comments on the €4.9 billion penalty facing rogue trader Jérôme Kerviel, whose risky investments nearly crashed the French bank Société Générale in 2008.

Currency protectionism

After the financial panic in 2008, global leaders promised to cooperate on stimulus spending, trade and new bank rules. Yet, they continue to act in a very self-interested way on monetary policy and exchange rates, writes The Wall Street Journal.

The growing danger today is currency protectionism — what students of the 1930s will remember as competitive devaluation or “beggar-thy-neighbour” policies. As economic historian Charles Kindleberger describes in his classic “The World in Depression,” nations under domestic political pressure sought economic advantage by devaluing their national currency to improve their terms of trade.

But the advantage came at the expense of everyone else. “As with exchange depreciation to raise domestic prices, the gain for one country was a loss for us all,” Kindleberger writes. “With tariff retaliation and competitive depreciation, mutual losses were certain.”

Rogue fine

The €4.9 billion fine facing French rogue trader Jérôme Kerviel is a distraction from the real issue, writes the Financial Times.

The real lesson is that banks need to be stringent in their compliance regimes. SocGen admitted to weaknesses and is spending €130Million(en) strengthening its systems. If only the record €4m fine imposed by the French regulator after it found “serious failings” in SocGen’s internal controls had been as eye-catching as the penalties Mr Kerviel faces.