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Pity the prudent Canadian saver. As she seeks a safe place to park spare cash and build a nest egg for retirement, the pickings are increasingly slim. At the peak of RRSP season, most banks are offering barely 1.5 per cent on once reliable five-year guaranteed investment certificates.

Canadian savers are better off than the Danes or Swedes, however. What was once thought a technical impossibility – negative interest rates – have become the norm in Scandinavia. If you buy a short-term deposit certificate in Sweden these days, you'll get back less than you invested.

The official explanation for this unprecedented state of affairs is that central banks are counting on near-zero interest rates to encourage domestic borrowing and consumption and kick-start economic growth. But after more than five years of record low borrowing costs, does anybody really believe that more consumer debt is the solution to slow growth?

Instead, many economists think that "surprise" monetary easing in more than a dozen countries and the euro zone in recent weeks smacks of a currency war, as central bankers engage in "competitive devaluation." Rather than seeking to stimulate domestic borrowing or improve the competitiveness of their economies through productivity enhancing structural reforms, central banks are trying to stoke exports by devaluing their currencies.

It's easy to sympathize with the central bankers. They are carrying most of the burden for keeping the world economy afloat as politicians abdicate their responsibilities. Why would any politician try to push through politically unpopular economic reforms if the central bank is prepared to compensate for said politician's fiscal sins?

In Canada, Ottawa's fiscal sins are sins of omission. The federal government is in good fiscal shape. But instead of using that flexibility to cushion the negative impact of lower oil prices – by running a deficit and boosting infrastructure spending – the Harper government is being pre-electorally rigid. That's left Bank of Canada Governor Stephen Poloz to shoulder more of the load, hence our sinking loonie.

Mr. Poloz continues to insist he hasn't been "talking down the dollar." Sliding oil prices are the main reason the loonie is testing the 80-cent (U.S.) level. But, intentionally or not, Mr. Poloz's words and actions put the currency on a downward trajectory that began well before oil's descent. Last month's interest rate cut turned the loonie into a "swoonie."

What Mr. Poloz denies, his Australian counterpart openly admits. After he unexpectedly cut interest rates last week, Reserve Bank of Australia Governor Glenn Stevens said an even "lower exchange is likely to be needed" to boost growth, despite a huge drop in the Australian dollar in the past year.

Manoj Pradhan and the global economics team at U.S. investment bank Morgan Stanley see "ghosts of the 1930s" in these attempts by central bankers to undercut their own currencies. "The lesson from the 1930s is that those who do so early benefit at the expense of those who wait too long," they wrote in a research note last week.

Ultimately, however, everyone loses. If one country thinks another is trying to gain an unfair export advantage by devaluing its currency, then it's likely to either one-up or retaliate against the offending country. The result is beggar-thy-neighbour trade barriers similar to those that sank the world economy during the Depression.

The United States, which arguably got the currency war rolling in 2010 with the Federal Reserve's quantitative easing (or QE, the equivalent of money printing), is now getting a taste of its own medicine. The U.S. dollar has surged recently as central banks the world over cut interest rates while the Fed muses about raising them.

A U.S. dollar that's too strong is bad for global stability. It leads to the kind of imbalances world leaders vowed to eradicate after the 2008 crash, specifically a global economy that depends disproportionately on U.S. consumption to keep chugging along. But that's exactly what's happening now, as the world counts on America to begin binge importing again.

The party might be over before it really gets started. Two bills introduced in Congress last week would deny President Barack Obama wide authority to negotiate trade agreements unless they contain provisions allowing the United States to retaliate against countries that – in the words of North Carolina Senator Richard Burr – "fight dirty via currency manipulation."

Ghosts of the 1930s, indeed.