crash 2005 Posted February 18, 2007 Share Posted February 18, 2007 (edited) http://www.telegraph.co.uk/money/main.jhtm...18/ccliam18.xml If that sounds far-fetched, the last time yen carry-trades built up was in 1997 and 1998. Back then, a seemingly innocuous event - a minor Russian debt default - caused global investors suddenly to re--examine their appetite for risk.As a result, the yen rallied by almost 30 per cent in just a few weeks as the carry-trades unwound. That caused the collapse of Long-Term Capital Management, a US hedge fund, ultimately leading to a rather serious global slowdown. The parallels with today are ominous - except this time the hedge funds are more numerous, the carry-trades are worth more, the global liquidity bubble is bigger and investors are now leveraged on a much, much scarier scale. And when you think about the extent to which even mainstream investors - not to mention pension schemes - have bought into hedge funds, it becomes clear why the yen carry-trade needs to be defused in an orderly fashion. If the Bank of Japan does raise rates on Wednesday, it could cause the carry-traders to trim their sails and slow down gradually. Or it could cause them to panic. No one knows.And that's why yen carry-trade" is so much more than a piece of inane financial jargon. It is a reminder of the often-forgotten lessons of recent financial history. Edited February 18, 2007 by crash 2005 Quote Link to comment Share on other sites More sharing options...
Eeyore Posted February 18, 2007 Share Posted February 18, 2007 "Those who forget history are doomed to repeat it." I've been wanting to say that all week. Quote Link to comment Share on other sites More sharing options...
Sinking Feeling Posted February 18, 2007 Share Posted February 18, 2007 http://www.telegraph.co.uk/money/main.jhtm...18/ccliam18.xml I'd raise IRs to 5.25% to put them on an even footing with the UK and the USA. Quote Link to comment Share on other sites More sharing options...
Guest Shedfish Posted February 18, 2007 Share Posted February 18, 2007 I'd raise IRs to 5.25% to put them on an even footing with the UK and the USA. in one! get in there.. that would get everyone's attention Quote Link to comment Share on other sites More sharing options...
cells Posted February 18, 2007 Share Posted February 18, 2007 I'd raise IRs to 5.25% to put them on an even footing with the UK and the USA. japan likes the carry trade, it keeps the yen low and exports high Quote Link to comment Share on other sites More sharing options...
i_godzuki Posted February 19, 2007 Share Posted February 19, 2007 Why is there a big gap between Japan rates and Western interest rates? It's because Japan has an inflation rate of 0.1% as it battles to emerge from the lost decade. The US cut its rates to 1% after 9/11. If the West are so worried about the carry trade maybe they should slash their interest rates to lessen the gap. Quote Link to comment Share on other sites More sharing options...
Ah-so Posted February 19, 2007 Share Posted February 19, 2007 Why is there a big gap between Japan rates and Western interest rates? It's because Japan has an inflation rate of 0.1% as it battles to emerge from the lost decade. The US cut its rates to 1% after 9/11. If the West are so worried about the carry trade maybe they should slash their interest rates to lessen the gap. Thank you for resolving this potential world economic crisis before it even happens. Quote Link to comment Share on other sites More sharing options...
i_godzuki Posted February 19, 2007 Share Posted February 19, 2007 Thank you for resolving this potential world economic crisis before it even happens. You're welcome. Quote Link to comment Share on other sites More sharing options...
Realistbear Posted February 19, 2007 Share Posted February 19, 2007 BoJ have cried wolf so many times........but, this bit of news may point to the Cavalry arriving soon from the Far East. Don't forget .25% hike in Japan will be multiplied by the time it reaches the consumer: http://www.warc.com/News/TopNews.asp?ID=21171 News: Today's Top Stories February 19, 2007 JAPAN'S GDP GROWTH RAISES SPECTER OF INTEREST HIKE TOKYO: Japan's businesses and consumers are bracing themselves for a possible hike in interest rates this week following robust growth in the country's economy during the last calendar quarter of 2006. GDP grew 1.2% in real terms from the preceding quarter, according to preliminary data released by the government. The rise represents annualized growth of 4.8%, the fastest rate of expansion since the January-March quarter in 2004. Data sourced from Wall Street Journal Online ; additional content by WARC staff, 19 February 2007 Whatever BoJ do, Gordon's HPI-MEW nightmare is in its last days. The banks will tighten soon and then its GAME OVER. The hangover from 10 years of Gordon's borrow and spend culture will be with us for a generation--or more. He may well become to be seen as the worst Chancellor this nation has ever seen. Great while it lasted--as debt always is. Trouble is debt is not illusory unlike the house prices it has created. Quote Link to comment Share on other sites More sharing options...
Realistbear Posted February 19, 2007 Share Posted February 19, 2007 japan likes the carry trade, it keeps the yen low and exports high Bit like the $--keep it globally competitive and raise exports while pricing imports out of the market. How do we survive with the highest valued currency in the world and trade balance at its worst since 1697? Gordon must be printing money. Quote Link to comment Share on other sites More sharing options...
uncle_monty Posted February 19, 2007 Share Posted February 19, 2007 So is it worth buying a few tho of Yen? Bro lives in Tokyo, so could organise a trip to spend it if it all goes nips up! Quote Link to comment Share on other sites More sharing options...
crash 2005 Posted February 19, 2007 Author Share Posted February 19, 2007 So is it worth buying a few tho of Yen? Bro lives in Tokyo, so could organise a trip to spend it if it all goes nips up! Quote Link to comment Share on other sites More sharing options...
Son of Taeper Posted February 19, 2007 Share Posted February 19, 2007 "Those who forget history are doomed to repeat it."I've been wanting to say that all week. You cut it fine Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.