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Bill Rankin, 2006

Currency pegs — either to a single currency or to a weighted collection of several strong currencies — is a way to try to avoid currency volatility and promote friction-free trade. But when confronted by a rapidly changing economy, pegs can also disrupt free-market mechanisms and lead either to local havoc (Argentina, 2001), or unhappy superpowers (such as the US disparagement of China's peg).

And make no mistake: deep economic entwinement does not preclude political or military intervention. In the case of the US and the Middle East today — or Great Britain's empire in the nineteenth century — smooth trade seems to require constant policing.

UBC Exchange Rate Service,