The scent of war is in the air. Currency war, to be sure, but the consequences for the global economy could still be dire. After a series of interventions aimed at holding down the value of domestic currencies, policymakers have expressed fears of a dangerous race to the bottom in exchange rate policy. The threat should not be taken lightly.

A currency war – contrary to what Guido Mantega, Brazil’s finance minister, said last week – has not yet broken out. Interventions by Japan, South Korea, Switzerland and Taiwan over the past year have been small and intermittent. But the chances of further action should not be played down.

It is not surprising that countries try to boost their exports in a fragile economic environment. Shifting the burden of growth on to foreign consumers is easier, politically and economically, than stimulating domestic demand. But although managing exchange rates is an easy way of giving domestic exporters an edge, it is self-defeating from a global perspective. Everyone cannot export their way out of trouble at the same time.