COULD A CURRENCY BOYCOTT STOP THE WAR?

There’s an interesting article by Irish Economist Richard Douthwaite in Resurgence about how to stop the war (or at least prevent the next one against Iran or whoever) by boycotting American and British currency. This doesn’t entail not buying goods from those countries. Rather, it involves short-selling the war-mongering governments’ currencies against any other currency of your choice (your domestic currency if you don’t live in either of these countries; the Euro would be a particularly apt choice if you do).

If enough people sell their U.S- and U.K.-currency denominated investments, and replace them with investments denominated in other currencies, and then, to the extent they can afford it, short-sell these currencies (details of how to do so in the article), the effect would be to push down the inflated (per IMF, World Bank and The Economist) values of these currencies, and as a result make it prohibitively expensive, very quickly, to finance foreign wars. Result: The troops come home.

I’m not an economist, but the irony of using a monetary boycott against the U.S. and U.K. governments certainly appeals to me. Could any economist in the blogosphere please read Douthwaite’s article and tell me if this could really work?

I’m sure that American and British readers will worry that this is a self-punishing proposition and that it might be unpatriotic or anti-American/British to participate. I think its impact would be positive for the citizens of both countries, for three reasons:

A lower U.S./U.K. currency would make it more expensive for these countries to import goods, and cheaper for them to export goods. That’s great news for workers in the U.S. and the U.K., since it would encourage more domestic production with domestic labour (take it from me, a Canadian, this is a fact).
The requirement to slash government spending would have the additional benefit of making Bush’s new tax cuts for the rich unaffordable, and require them to be rescinded.
These corrections are inevitable anyway, and by having them occur now rather than later they will force some spending restraint now rather than delaying it and saddling future generations with paying for today’s fiscal incompetence and excess. Even Chairman Greenspan would applaud that.