The prevailing rhetoric about currency wars smacks of the 1930s, when a sauve qui peut mentality marred international monetary relations. What are the lessons of that beggar-thy-neighbour period for Group of 20 policymakers meeting at a time of renewed uncertainty in sovereign debt markets?

While the world has so far avoided the extreme loss of output experienced in the Great Depression, history suggests, among other things, that competitive devaluations and capital controls are the inevitable consequence of surplus countries failing to take any responsibility for global payments imbalances.

The 1930s gold standard was a fixed exchange rate system in which deficit countries were required to adjust by way of deflation rather than devaluation. Surplus countries, in contrast, incurred no penalty for accumulating gold. The chief surplus countries were the US and France, while counterpart deficits were run by countries such as the UK, Germany and Italy.