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 First Shots Are Fired in Global 'Currency War'
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www.cnbc.com
"Faced with a stubbornly slow and uneven global economic recovery, more countries are likely to resort to cutting the value of their currencies in order to gain a competitive edge.
Japan has set the stage for a potential global currency war, announcing plans to create money and buy bonds as the government of Prime Minister Shinzo Abe looks to stimulate the moribund growth pace.
Economists in turn are expecting others to follow that lead, setting off a battle that would benefit those that get out of the gate quickest but likely hamper the nascent global recovery and the relatively robust stock market."
More at the link
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The link wouldn't load....ill try it again later.
Is Japan doing what Musselini and Hitler did?
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Oops....Mussolini*
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The link loaded for me. Were you trying on your phone?
Mussolini and Hitler did a lot of things. What do you mean?
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Yeah, my phone. But it was just the connection I think. It worked for me a few minutes ago.
I don't know enough about finance to comment too much on this but it seems like the short term gain from inflation like this is probably squashed by the long term consequences. Mussolini and hitler both spurred economic growth by essentially printing money and devaluing their currency. Without having read the article it seemed like that is what was being described. Even after reading the article it still sort of seems like that is basically what is being suggested but again I don't really know.........
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As far as I can work out Japan is following the lead of US, UK and ECB rather than being the instigator. What might I be missing?
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dmaestro
16-Jan-13, 13:18
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Ignorance, mark, that is what you are missing. Something you don't need anyway
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mark
I don't understand your question.
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Mark
Let me start here. What kind of economy does Japan have? Are they largely an import or export economy?
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Prog....afaik Japan is a net exporter. It isn't that beyond the point? Again forgive me if I'm missing something but I read this about being about " quantative easing" otherwise known as printing money/ increasing the money supply/ be basing the currency. .the US and UK amongst others have been busy doing this since the global financial crisis. it pays for debtor nations and particularly the US to do this from one perspective albeit ignoring morality and the lessons of history. Again, I'm happy to be educated on what I'm missing. To me economics can seem more of an ideology than a science.
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mark
Economics is a science of a sort, though, a science of *practical/pragmatic* human behavior, which isn't always completely rational, right?
Anyway, because Japan is primarily an export economy, the only way to help their economy right now is to make their products more competitive price-wise. The only way to do this, when all the economies you sell your stuff to are devaluing their currencies is to devalue our currency even more. However, it's a deadly gamble because it could crump all of their own internal economy from the inflation. Now we get to the rub . . . who is the second largest holder and buyer of US treasuries (assuming we forget about all of the monetizing of debt our own Fed is doing)? At this point, if you guessed "Japan," you would be correct. What do you think will happen to world markets if Japan goes down the tubes and can no longer buy our debt?
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Prog, I get that there are huge global imbalances and that the US is in a pickle having spent way beyond its means and lived on the largess of other nations . What I don't get is why Japanese actions now are being flagged as " first shots in a global currency war" when it was US policy for several years initially under Greenspan that has sparked this imbroglio . What am I missing?
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mark
because they are the first country to make inflation and devaluing of their currency "official" policy - no euphemisms or double-speak
it's on
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dmaestro
18-Jan-13, 13:12
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Japan has struggled economically since the late 1980s when the bubble collapased. Thus a whole generation has grown up wih stagnacy and even some deflation knowing their elders are better off than they are. That is why they are doing it.
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No DM. The currency is officially being devalued in order to make their export products more competitive worldwide because every other country is devaluing their currencies and in a hurry. It's a race to the bottom.
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dmaestro
18-Jan-13, 14:41
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I agree nations are devaluing their currency exchange rates to boost their economy. Not convinced it is that dire yet. I think China is the biggest currency manipulator right now.
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Prog I think you're wrong. Japan is setting 2% inflation goal. I dont see that is being particularly different from other nations. Oz central bank has had a target inflation range of about that for a good few years now. The US may or may not have inflation as " official policy" but it's common knowledge that there has been masive debasement of the currency over several decades at least. I'm still struggling with why one would point the bone at Japan?
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mark
Why point the bone at Japan? Because they buy much of our debt (the debt our OWN central bank isn't buying of course - lol). If they go, then the dominos fall pretty quickly.
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Prog ... well that may well be true, similarly if china were to cease accepting US debt though there are reasons why there would be reluctance to.. debtors are rightly beholden to creditors in an orderly and grown up world. That's what happens with debt, I still can't fathom why you would describe Japan's actions as " first shots"?
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josh
so are they firing the first shots in a global currency/trade war? or are they doing the same thing as we are doing in order to shore up and assisst our economy? i think that is the question.... if we, and britain, and other countries are doing the same, and it appears we are, we is it ok for us, but when they do it, it ismstarting a war?
i think what mark is asking is what is different about what they are doing from what we have been doing?
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The title isn't mine guys. Lol
It's cnbc's.
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josh
sure.... but you basically agreed with it.
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jeff
As a matter of policy central banks allow for a certain amount of inflation through new money creation (our of thin air, no less) that can be loaned out as a "stimulus". And of course many countries have been involved in rapid devaluation of their currencies in order to improve their trade deficits (among other things). The the game is much more deadly for the Japanese as they literally have their country's money hinged on export products. Up until now countries have been doing the money devaluation thing, but Japan has singled their plan to keep up ahead of the rest. They intend to race everyone else to the bottom.
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ex-skf.blogspot.jp
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"One Of The Most Anticipated Central Bank Meetings In A Long Time"
"The world of central banking has gotten a little dull, lately, after a historic 2012.
"The ECB seems to be in neutral. The Fed's policy seems fairly clear cut.
"The center of action is Japan, where expectations of more easing (fiscal and monetary) has sent the Nikkei on a rocket ride since mid-November.
"The Bank of Japan has started a two day meeting, and the actual result will come sometime tomorrow. Everyone expects an increase in the inflation goal.
"Here's a preview from Nomura:
We expect the BOJ to introduce the 2.0% inflation target desired by the government. We also expect further easing measures consistent with raising the inflation target from the previous "goal" of 1.0%. The size of the asset purchase fund could be increased (mainly JGBs), or an open-ended scheme could be introduced, scrapping the time limit and ceiling for asset purchases as the BOJ bows to government and market expectations. Prime Minister Abe has also mentioned a jobs target and a public-private fund to buy foreign bonds, but we doubt the BOJ will go that far straight away. If it does decide on bolder easing measures, we think it is more likely to increase its "rinban" JGB-buying operations. This would keep in check the level of risk assets on the BOJ's balance sheet and allow it to buy a wider range of JGBs. In that case, the BOJ's banknote rule could be temporarily frozen."
www.businessinsider.com
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More
www.telegraph.co.uk
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It sure is an interesting landscape for us "little folk" to be trying to make wise investment/ financial choices! What's your current advice for us Josh? Gold and ammunition ?
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Mark
I know your comment is trying to be facetious. But you strike on what is "safe" (safest) right now are "things" of value. Commodities. Precious metals are one option and while perhaps not technically the only investments that will preserve wealth as a store of wealth are probably the safest. But getting into energy or water or food would probably be good investments. But I don't give professional investment advice. I also tend to think having a bit of ammo is always good, especially if you have a gun, but as trade goods also good and in the same vein, whiskey, cigarettes, and band aids.
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Toilet paper
The man with butt wipe to trade will be king. He will eat. He will have the pick of the choicest females.
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Yeah but toilet paper longevity is hard to find. It's really just a short term investment. You better have a needing market or your investment may just disappear down the toilet!
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