Posts Tagged ‘Japan’

QE2 is not just some opaque econo-speak that is of no consequence to the common men and women of Earth. It is about as serious a force to be reckoned with as a nuclear weapon. I don’t have the math at hand but my instincts tell me that if someone were to calculate the potential energy of a multi-trillion US dollar injection of liquidity into the world economy it would measure up to an impressive amount of megatonage.

From The Telegraph:

Currency wars are necessary if all else fails

By Ambrose Evans-Pritchard

Asian investment in plant has run ahead of Western ability to consume. The debt-strapped households of Middle America, or Britain and Spain, can no longer hold up the dysfunctional edifice. Asians must take over, or it will come down on their own heads.

The countries actively intervening in exchange markets to suppress their currencies – China, Japan, Korea, Thailand, even Switzerland, to name a few – are all too often the same ones that have the biggest trade surpluses with the US.

They are taking active steps to prevent America extricating itself from the worst unemployment since the Great Depression, now 17.1pc on the latest U6 index and rising again. Each country is doing so for understandable reasons: Japan to avoid a deflationary crisis, China to hold together a political order that is more fragile than it looks. In both these cases they are trapped because they clung too long to a mercantilist export strategy, failing to wean themselves off American demand when the going was good.

Yet this is an intolerable situation for the US. It should be no surprise that Washington has begun to retaliate in earnest, and not just by passing the Reform for Fair Trade Act in the House (not yet the Senate), clearing the way for punitive tariffs against currency manipulators.

The atomic bomb, of course, is quantitative easing by the Federal Reserve. America has in effect issued an ultimatum to China and G20: either you stop this predatory behaviour and agree to some formula for global rebalancing, or we will deploy QE2 `a l’outrance’ to flood your economies with excess liquidity. We will cause you to overheat and drive up your wage costs. We will impose a de facto currency revaluation by more brutal and disruptive means, and there is little you can do to stop it. Pick your poison.

Read the whole article HERE

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And where there are trade wars, real ones are more than likely to follow…

“Well the intellectual midget fight is on. The BOJ asked the US and Europe for support in case of intervention and both basically looked away like the prom queen when the class geek asks her for a dance. At the end of the day though, a ninja’s got to do what a ninja’s got to do and the BOJ moved ahead with currency intervention. The ECB can’t be too pleased with that, especially the Germans who after 8 years of EUR appreciation were finally starting to reap the benefits from teaming up with economic misfits. With the Fed reinvesting interest payments in fresh treasuries and Q2 rumors, and now the BOJ in currency intervention mode, the clouds are gathering over export prospects for Europeans. The next logical step will be trade wars. When one hears US senators campaign against the Yuan manipulation it’s a miracle we haven’t seen more of it yet.” – Nic Lenoir from ICAP

To read the whole post see HERE

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