Brazil's warning of a global trade war in the wake of wrenching currency shifts is a stark reminder that the embers of the financial crisis are still burning.
Massive flows of money continue to move out of the U.S. dollar and the euro, overwhelming efforts by Brazil, Chile and many other commodity-reliant countries to rebuild their economies after the recession.
In Brazil's case, a runup of almost 40 per cent in the value of its currency against the U.S. dollar since 2009 has cut into the cash the country earns selling items that are priced in dollars - such as chemicals, cocoa, coffee, iron ore and steel - on global markets.
Brazilian Finance Minister Guido Mantega, who popularized the phrase "currency war" last year, blames both the U.S. and China for deliberately manipulating their exchange rates to gain the upper hand in global trade, a tactic known as competitive devaluation.
Mr. Mantega has further ramped up the protectionist rhetoric.
"This is a currency war that is turning into a trade war," he told the Financial Times.
At the same time, he announced the country's central bank will start buying dollars in the futures market, a strategy intended to create demand for dollars and curb the real's value.
Brazil, like its neighbour Chile, has already implemented exchange-rate controls to stymie currency speculators. And Mr. Mantega warned Brazil would also push the World Trade Organization to clamp down on exchange-rate manipulation.
Brazil is taking steps to obstruct physical products as well. The country has already moved to block some imports, recently slapping steep tariffs on hundreds of millions of dollars worth of imported Chinese toys to hold back the flood of cheap imports and protect domestic manufacturers.
But experts say the trend toward more currency militancy is misguided, potentially dangerous and ultimately futile.
The problem isn't what any one country is doing, but a dysfunctional global exchange-rate regime, according to Dan Ciuriak, former deputy chief economist at Foreign Affairs and International Trade Canada.
"The problem of misalignment of exchange rates is a global one and needs a global fix," Mr. Ciuriak said.
Brazil can try to insulate itself with exchange-rate controls, but that only pushes the problem to the next hot market in a "beggar-thy-neighbour" fashion, he said.
Daily capital flows around the world have grown in the two years since the financial crisis to roughly $4-trillion (U.S.) from $3.5-trillion. And more money changes hands in a week than the total value of goods and services traded globally in a year, according to Mr. Ciuriak.
"The global system is hugely unbalanced and the crisis is far from resolved," he warned. "Money is moving big time, and the potential for this to explode again is there."
John Weekes, a former top Canadian trade negotiator, agreed Brazil is the victim of a global currency problem, not unfair trade.
"It's really dangerous to start treating this as a trade issue because it suggests there are trade answers," Mr. Weekes said. "The alignment of currencies and the relationship between economies is really something that ultimately has to be addressed at the macroeconomic level."
The root problem - as it was when the financial crisis erupted in 2008 - is the swollen trade gap between the United States, which consumes too much and is running huge deficits, and China, which saves too much.
Brazil may want to make this into a trade fight. But poking the U.S. Congress with protectionist rhetoric won't help anyone, including Brazil, Mr. Weekes argued.
Mr. Mantega is right to be concerned over China's approach to its currency, but threatening import tariffs against the U.S. would be short-sighted, said William Cline, Washington-based senior fellow at the Peterson Institute for International Economics and former chief economist of the Institute of International Finance.
Mr. Cline pointed out that the U.S, Federal Reserve's easy-money policies are designed to spur consumer demand, which logically would lead to increased imports - from Brazil and everywhere else.
"The implication is that [Mr. Mantega is]saying, in a lot of countries, if currencies get overvalued and they worry about their trade balance, you could see them start to impose import tariffs," Mr. Cline said. "It seems rather far-fetched to me."
And he said Brazil shares some of the blame for its currency problems due to "excessive fiscal expansion and an extremely high interest rate," which make the country vulnerable to capital inflows when U.S. rates are at zero.
Mr. Cline applauded Brazil, however, for trying to take the issue of currency manipulation to the WTO. But other analysts said the effort wouldn't gain much traction.
Canadian economist Mr. Ciuriak said a lot of countries peg their currencies to the U.S. dollar, including most Caribbean nations, and they're not necessarily manipulators. Under WTO rules, currency manipulation has traditionally meant having different exchange rates for imports and exports, he added.
In the current edgy investment climate, fiery rhetoric such as Mr. Mantega's has consequences.
"No doubt the Finance Minister's comments are contributing to nervousness in the markets," said Flavia Cattan-Naslausky, currency strategist at RBS Securities Inc. in Stamford, Conn.
"For Brazil, it misses the point. Yes, the global liquidity and the differential between [interest rates in]developed markets and developing markets is definitely creating a lot of pressure on currencies."
But Ms. Cattan-Naslausky said the Brazilian government shares some of the blame and could help defuse the crisis by signalling its intent to rein in its own spending.
BATTLEGROUNDS IN THE CURRENCY WAR
How some key countries hit by soaring currency values are fighting back.
Imposed bank controls on currency speculation, tripled taxes on foreign purchases of bonds to 6 per cent, authorized its sovereign wealth fund to buy U.S. dollars
6-per-cent inflation rate.
Central bank plans a record $12-billion in U.S. dollar purchases this year to cool the peso's rapid rise, and lifts limits on overseas investments by pension funds
3-per-cent inflation rate
Government plans to reinstate withholding tax of 14 per cent on local bond holdings by foreign investors
3.5-per-cent inflation rate
Central bank plans to impose capital controls to limit inflows, including minimum reserve ratios for foreign-currency bank accounts held by foreigners
7-per-cent inflation rate
Financial regulator investigating speculation by foreign investors, central bank tightens reserve requirements for Taiwan dollar deposits held by foreign investors
4.7-per-cent inflation rate
Intervenes in the currency market in September to push the soaring yen down against the U.S. dollar
0.1-per-cent inflation rate