Wednesday, Sep 15, 2010
The currency war
Daily Telegraph: Bank of Japan riles US with yen move
The race to the bottom
Japan has launched a huge intervention in the foreign exchange market for the first time since 2004 to stem the rise of the yen and head off a deflation spiral, prompting harsh protests from top US Democrats on Capitol Hill.
Posted by tom101 @ 10:10 PM (927 views) Add Comment
5 Comments
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1. Crunchy said...
How dare Japan get in the way of the ditching of the dollar.
2. uncle tom said...
The Japanese situation gets ever more surreal - on the one hand they are on the slippery slope toward sovereign default, and on the other hand they are having to intervene to supress their currency..
..can't help feeling that this might all unravel very suddenly..!
3. bellwether said...
UT where Japan generates its own currency there is simply no possiblity of sovereign default (cf Greece).
An obvious point, generally missed, is that if everyone is competitively devaluing their currency to sell to the global economy (as appears to be happening), the devaluations cancel each other out and you don't get any sort of inflation.
4. tom101 said...
UT, I know what you mean. Have a feeling we will be seeing fluctuations in currencies like the stock market......
Great for the gold bubble!
5. uncle tom said...
bellwether,
Simply no possibility? I beg to differ..
Consider the extra cost of servicing their national debt, if Japanese inflation settled at zero, let alone went positive. Add that to their existing budget deficit, then factor in their aging and shrinking population, which is steadily becoming less economically active.
Consider also that Japan has some of the most spineless politicians on the planet, who seem permanently incapable of making any tough decisions, and that the bastions of its export strength are fast being encroached on by China.
And finally, take account of the fact that Japan is exceptionally dependant on the import of commodities.
Irrational Yen strength could switch to extreme Yen weakness with remarkable speed..