Yesterday, I paid US$2.99 to download an episode of Entourage on iTunes. More than a year ago, my credit card bill would have shown a charge of $3.88. The Canadian dollar was worth less then. Today, my bill will be around $2.99. The loonie is almost in pair with the U.S. dollar.

When our currency appreciates compared with other currencies, we become richer. It’s as if we all suddenly got raises.

Politicians, though, believe the opposite. Right now, the world’s governments are launching a “currency war.” They’re printing tons of money in the hope that it will lose value relative to their neighbours’ currencies. It’s the most ridiculous war, where winning means shooting oneself in the foot.

Why? According to the media, governments want to help their exporters. When you sell in Canadian dollars and that dollar falls, your product becomes less expensive – and more attractive – for foreign buyers. This might be a plausible explanation for certain countries like China, whose economies are heavily dependent on exports. Although several other countries, like Germany and Switzerland, have demonstrated that it’s possible to succeed on the international market even with a strong currency.

But for several western countries, the real explanation is to be found elsewhere. In the United States for example, exports make up only 12 per cent of GDP. Why impoverish the population for so little?

Here’s a hint: If tomorrow morning the American government confiscated every dollar held by the entire population, it would still need $12 trillion more to repay all of its debts and honour its promises to future retirees, according to David Walker, the country’s former comptroller general. The U.S. government is carrying a gigantic debt that it will never reimburse. But why go under when it just needs to reduce the value of the American dollar by printing a ton of money – what the media refer to as “quantitative easing” – and a portion of its debt will disappear as if by magic. When you reduce the value of what you owe, you reduce your debt.

This solution would also help Japan, the most indebted country on the planet. And Great Britain, which is bogged down in deficits.

Listening to our leaders, you’d think we could become richer by being poorer, by underselling the fruits of our labours. And so we have a “currency war.” But underneath this absurd rhetoric, another motive hides: Several governments will try, in the coming years, to go bankrupt on the sly.

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