Here’s why. In Q4 of 2015, the value of German exports as measured in euros was actually up 0.5% over Q4 of 2014. But over the same time span the euro depreciated versus the dollar by more than 10%. As a result, the value of German exports as measured in dollars from Q4 2014 to Q4 2015 was also down more than 10%. But domestic German economic activity doesn’t take place in dollars, of course, it takes place in euros. In other words, the export-oriented sectors of the German economy felt okay in 2015, at least from a domestic political perspective. But if you had not enjoyed that euro depreciation against the dollar, German exports would have felt terrible, and there would have been significant domestic political consequences. We would all be reading today about “the industrial slowdown in Germany”, with scads of articles in the FT about how Merkel’s regime was losing popular support.

To be sure, the depreciation of the euro versus the dollar made everything that Germany imported that much more expensive. So this isn’t necessarily some profits windfall for German exporters, and if you’re the German equivalent of Walmart it’s a big problem. I’ve read a number of economists and analysts (not so much in regards to Germany but definitely in regards to China) say that this economic downside serves as an effective deterrent against rampant and competitive devaluations. Unfortunately, that’s pure nonsense.

Thinking of national governments as just another big company (or, in slightly more academic terms, conflating national competitiveness with private sector profit margins) is a classic mistake that investors and economists make when they analyze politics. Neither the German government nor the Bundesbank care about corporate profit margins! They care about economic activity. They care about keeping the factories running, with real people making real things that can be sold in the real world. A depreciating currency is, by an order of magnitude, the most effective weapon in any modern government’s arsenal for keeping the factories running, and when global trade starts to contract this weapon will be employed by any means necessary, regardless of the P&L consequences for the private sector. That includes the P&L consequences for the banks, by the way.

Now everything I just wrote about the domestic political dynamics of Germany, multiply it by 10 for Japan. Multiply it by 100 for China. Both China’s export volumes and export values are declining, and no matter how much domestic credit and currency they pump in (and god knows they’ve tried), there is no possible way to stimulate the domestic economy enough to pick up the slack from a declining export sector. This is a domestic political disaster, and getting those factories humming again is a domestic political imperative. At least if there’s a regime change in Germany, Merkel and Schäuble and Weidmann can all retire to their respective comfy chalets and pick up however many millions they like by hitting the speaker circuit. Somehow I doubt that those retirement options are available for senior Politburo members rousted in the middle of the night by a new Chinese regime. To get the factories hiring you need to sell more stuff. To sell more stuff you need to cut your prices. To cut your prices you need to devalue your currency. This is why China is going to float the yuan. Not because George Soros or Kyle Bass said they have to. Not even because their foreign reserves are by no means the fortress balance sheet they’re made out to be. No, China is going to float the yuan because they want to, because it’s clearly the winning move from a domestic political perspective.

Just like the Smoot-Hawley Tariff Act was clearly the winning move from a domestic political perspective in 1930. Just like the anti-free trade diatribes by both the Republican and Democratic presidential frontrunners are clearly the winning moves from a domestic political perspective in 2016. This is … ummm … not good.

It’s not good because these winning moves from a domestic political perspective do not occur in an international vacuum. To the degree that these monetary policy decisions impact other countries – and when global trade volumes are shrinking these decisions impact other countries a lot – other countries are going to respond with their own “winning” moves from a domestic political perspective, and before long you have a competitive death spiral of monetary policy decisions that sound good when you’re making the decisions, but end up putting everyone in a worse position and shrinking the global trade pie even further.