It’s amazing how stories take hold in the financial press. In spite of various articles pointing out that there isn’t really a currency war, only the phrase is now remembered and market reporting takes it for granted that there is one (as in the latest FT global markets overview).

This reminds me of the “green shoots” talk of early 2009. There weren’t really any green shoots; it was more that the garden had been flattened by a volcano, and the rate of lava flow had started to slow down. Nonetheless, the market rallied and everybody and his dog was talking about “green shoots.” The phrase still makes me feel slightly sick.

Although fiscal and monetary action by the authorities was important in that episode, the lesson remains that it is not always what is really going on that is important, but what the market thinks is going on. So I am thinking about trades that would benefit from a currency war. So far I can’t think of any.

Update: More on the absence of a “war” from Free Exchange.