Dr Kamal Monnoo The escalating currency wars are now bordering on the point of being silly, because this in fact is the time to show solidarity and evolve a joint strategy based on common gains and sacrifices to pull the global economy out of recession as quickly as possible. Ironically, everyone instead seems to be busy either calculating the true value of the currencies of its economic competitors, or trying to adjust ones own currency in accordance with the self-perceived true value of their competitors currencies. One wonders that amidst this display of gross selfishness why everyone seems to have forgotten the iron law of currency movements: that what you gain on the swings you lose the roundabouts? The US wants China to revalue its yuan upwards or as an alternative wants to devalue its dollar and this in order to support its manufacturing, exports and job creation. What perhaps it needs to remember is that a cheaper dollar or a more expensive yuan will be good only for a few American companies and that also just up to a point. The dollars slide, if it takes place, will mean that the American companies will find it more expensive to raise capital internationally and will be followed by the natural outcome from currency slides a negative country outlook cum perception. Further, dollars slide will surely hint at deeper worries about Americas ability to promote growth and create jobs at home. Perhaps, the cardinal rule to remember in all this is that artificial ventilators can never turn out to be permanent cures. We are witnessing just about the same thing in the euro zone. A few years ago, even global celebrities bowed down before the almighty euro. Gisele Bund-chen, a Brazilian supermodel, insisted on being paid in only euros. Jay-Z waved euro 500 notes in a rap video. The W-Tang Clan, fellow American rappers, listed the price of one of their CDs in euros rather than dollars on their official website. Today, however, the euro has lost much of its glamour. It has fallen by nearly 15 percent against the dollar since December 2009. Most analysts think that the decline still has some way to go. Some even talk of an ultimate parity between the euro and the US dollar. While this decline to, perhaps, the true value of euro from originally an artificial hike may appear to be a severe blow to Europes self-image, the real question is that is it such a bad thing for business in the euro zone in the long run? The answer by most economic experts is that with the euro working at its real value, the euro zone stands a much better chance to achieve some of the things it had originally set out to do, like sparking a glorious period of innovation and growth. Pakistan: Amidst all these wars between the main currencies of the world, surely we must also be having our own concerns about the way the Pak rupee should be moving in the coming months. With the US dollar always weighing strong in the basket of currencies we use to determine our rupee value, the slide of dollar invariably can in-turn lead to a slide in the value of the Pak rupee. The temptation to move it downwards will feature large in the minds of the policymakers, since the exporters in any country almost always consider their home currency to be overvalued. And then of course the routine argument that rupees decline, in contrast, tends to bolster national exports. My argument is that if indeed the Pak rupee has been as overvalued in the recent period as being said by some experts, then what it really implies is that the exporters, in order to survive, would have worked hard to boost productivity in this era of a strong rupee. Therefore, they should now be well placed to reap the fruits of their good management. Anyway, regardless of what school of thought you subscribe to, our history of currency devaluation should tell us that, given our debt burden and historic current account deficits, the Pakistan government needs to overcome any temptation and pressure (both domestic and international) to devalue the Pak rupee at this stage. A lesson can also be learnt from the recent nosedive of the euro. Sure, the euro slide provided similar exporting opportunities to the European companies (especially the Germans), but still you do not find any excitement amongst European entrepreneurs. Mainly because most businesses loathe uncertainty and having to revisit contracts with customers and recalibrate investment plans. Then the case concerning value addition adds altogether another perspective to this argument. Successful exporters operate in markets where price is far from being the primary consideration. For example, Germany is more focused on industrial goods than consumer ones. It is also dominated by highly specialised companies, many of them small - that produce bespoke goods for individual customers. Georg Tacke of Simon-Kucher & Partners, a leading consultancy, recently pointed out in his address to the joint session of the European Chambers that even those companies that are enjoying windfall profits are reluctant to treat the euros decline as an opportunity to gain market share, through cut-throat pricing, since they are well aware that what goes down can also go up. Finally, the biggest worry for Pakistan, in case the Pak rupee is devalued, may not be so much the decline of the rupee itself, but rather what the slide will say about the Pakistani economy to the outside world. A declining economic perception is often accompanied by enhanced donor tightening, which then invariably leads to curtailed public spending and growth. Both as we know, in turn, create a serious dent in the short-term prospects of job creation. What we instead need at present is to somehow engineer an economic environment that yields innovation and productivity growth. Although a reduced Pak rupee from its current value may be viewed by some as a silver lining, we need to beware that it will be accompanied by some dark clouds The writer is an entrepreneur and an economic analyst. Email: kamalmannoo@hotmail.com