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pepo

Well-Known Member
Totalmente de acuerdo en lo que dices al 100%,yo la tengo firmada a 30 años y estoy convencido que en este tiempo nos recuperaremos e incluso volverán a venir mal dadas,pero aún así con lo jodido que está ahora en mi caso sigo ahorrandome 60.000€ a lo largo de la hipoteca en comparación con una refenciada al euribor entorno al 4% de interés,dicho euribor lo normal que es que a no tardar mucho tiempo empiece a subir por la preferencia delBCE a controlaar la inflación,pero lo que no sabemos en cuanto afectará al euro al igual que la posible devaluación del yen...solo nos queda esperar.
HMD 238.000€ A 162
Como dice soros, eso es demasiado optimista. No puede haber 60.000 euros de ahorro porque aparte de la apreciación del yen hace mucho que el tipo de interés en euros cayó del 4%... y mucho. Yo lo tengo calculado con datos reales y después de 3 años, y habiendo entrado en 165, unos 9.000 euros de ahorro en esos tres años sobre una hipo de más de 300.000 €...
 

omega

Active Member
japon ha intervenido la moneda, a ver hasta donde nos lleva :)
Te voy siguiendo jejejeje, como digo en el otro foro, pues depende si es una intervencion real o toque de maquillaje, si es una devaluacion a lo Solchaga deberia irse en dias a 120 si no me temo que el mercado lo absorbera y poco mas podran hacer desde el BOJ, y eso si sera una señal clara para los yeneros de hacia donde podemos ir en 2011.
 

crocop

New Member
Te voy siguiendo jejejeje, como digo en el otro foro, pues depende si es una intervencion real o toque de maquillaje, si es una devaluacion a lo Solchaga deberia irse en dias a 120 si no me temo que el mercado lo absorbera y poco mas podran hacer desde el BOJ, y eso si sera una señal clara para los yeneros de hacia donde podemos ir en 2011.

ya veo que no soy el unico que madruga :)
 

ffrhmd

Member
......

¡Sí, si, si,... la intervención ya está aqui!!!
Ay, perdón que en estas cosas no hay que ponerse "forofón" :eek:

¿Un 82? ¿Que pasó en el 82? Ay si, Naranjito... :)
Por tanto, 90=82*1,1 . ¿Veremos el 1,1 en el otro Par?.

Hoy estamos en 1,3, pero en Junio estaba en 1,19. ¿Como y cuando bajará a 1,1?

Fuente.- FT.

Tokyo intervened in the currency markets for the first time in more than six years to weaken the yen, after the currency broke through Y83 against the US dollar and threatened exporter profits and business sentiment.

The unilateral intervention on Wednesday morning sent the yen down as much as Y1 within an hour and gave the Nikkei 225 and its exporter constituents a boost. However, the action came at a sensitive time that could cloud the debate over China’s control over the renminbi.

“In order to restrain excessive moves in the currency market, we earlier carried out currency intervention,” Mr Noda said. He added that he was prepared to take further action, including further intervention, if necessary and that overseas authorities had been contacted.

The action is being interpreted as what is known as a smoothing operation, which is carried out to flatten sudden moves in the currency, rather than to send the currency to a specific point, according to traders. Yoshito Sengoku, chief cabinet secretary, suggested to reporters that the finance ministry saw levels of Y82 as a line of defence for the economy.

Before the intervention, the dollar had continued its decline against the yen to as low as Y82.88 in morning trading in Tokyo, extending losses overnight, in spite of upbeat consumer spending data from the US. Traders had also been testing the resolve of Mr Kan to stay out of the market after he won a leadership challenge from party heavyweight Ichiro Ozawa on Tuesday.

The intervention began around 10.30am Tokyo time, after which the yen dropped as low as Y85.14 and was last trading at Y84.84.

Mr Ozawa had been seen by markets as more likely than Mr Kan to intervene to curb the rise of the yen, which had been trading at a 15-year high against the dollar and prompted complaints from the business sector.

The stock market jumped 2.8 per cent to 9,557.85 as of mid-afternoon trading in Tokyo, reversing an earlier 1.1 per cent decline.

Japan’s intervention is likely to heighten tension around the already charged issue of China’s persistent intervention to hold down the renminbi, which was set to be one of the most contentious issues at the forthcoming meeting of the G20 group of countries in Seoul.

The US is disappointed that China has allowed the currency to rise by less than 1 per cent against the dollar after its decision to unpeg the renminbi in June. This week, Congress will hold a series of hearings to investigate the options for blocking Chinese imports or having the currency intervention declared illegal by the World Trade Organisation.

Japan’s intervention is likely to complicate the debate. Several G20 countries, including the US, feel that they are under competitive threat from China’s currency policy. But the fact that Japan is intervening against its currency – at a time when the yen is not particularly strong in real terms :eek: – will make it hard to point at China as the one major economy that is manipulating its exchange rate.

Tetsufumi Yamakawa, head of research at Barclays Capital in Tokyo, said Japan’s intervention “at least, would give a good excuse to China for not moving by claiming that the Japanese authorities are manipulating the currency [as well].”

He said that this consideration probably had put Tokyo off intervening for such a significant amount of time.

Speaking before Tokyo’s intervention, Fred Bergsten, director of the Peterson Institute think-tank in Washington and an advocate of litigious and legislative confrontation with Beijing, said that the US needed to organise a coalition of countries, including Japan, to put pressure on China at the G20.

Debate as to if and when Tokyo would intervene had also been intensifying given that previous unilateral interventions in the market had only proved successful over the short-term, such as days or weeks.

Moreover, the last time that the finance ministry ordered the central bank to intervene over a 15-month period of 2003-04 left it with unrealised losses of Y32,300bn in its foreign exchange special account. :eek:

There is also an argument over whether the yen is really strong or not. Nominally speaking, it has been trading at 15-year highs. However, adjusted for prices and trade weighted to include a basket of currencies used by countries that Japan trades the most with, shows a very different picture.
 
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soros

Well-Known Member
Economía
Japón interviene en el mercado de divisas para frenar la espiral del yen
Hora: 04:56 Fuente : EFE

Tokio, 15 sep (EFECOM).- Japón intervino hoy en el mercado de divisas, por primera vez desde 2004, para frenar la apreciación del yen frente al dólar, que se cotizaba en niveles récord en más de quince años, informó el Ministerio de Finanzas.

El ministro de Finanzas, Yoshihiko Noda, y el Banco de Japón (BOJ) confirmaron la intervención, llevada a cabo a las 10.30 hora local (1.30 GMT) y que causó una rápida apreciación del dólar y un fuerte repunte de la Bolsa de Tokio.

Antes de la intervención, el dólar se cotizaba en 82,87 yenes, su nivel más alto desde mayo de 1995, y, minutos después, se apreciaba hasta los 84,36 yenes, mientras el Nikkei, que abrió a la baja, repuntaba un 1,8%.

Esta es la primera vez que las autoridades monetarias japonesas intervienen en el mercado de divisas, para vender yenes a cambio de dólares, desde el 16 de marzo de 2004.

Aunque no han precisado la escala de la intervención, el ministro de Finanzas confirmó que fue llevada a cabo por Japón de forma unilateral mientras el BOJ, en un comunicado, expresaba su deseo de que esta medida contribuya a un tipo de cambio estable.

Noda indicó que "Japón no puede tolerar los efectos de la apreciación del yen en su economía" y señaló que podrían tomar medidas adicionales si lo consideran necesario.

El gobernador del BOJ, Masaaki Shirakawa, indicó en el comunicado que ha habido incertidumbres, especialmente para la economía estadounidense, que han provocado inestabilidad en los mercados de divisas.

La intervención se ha ordenado al día siguiente de que el primer ministro japonés, Naoto Kan, superase una elección interna en su partido y fuese confirmado al frente del Gobierno.

Hasta ahora, Kan se había mostrado remiso a una intervención, que favorecía su oponente en la elección, Ichiro Ozawa, si bien siempre había asegurado que tomaría medidas en caso necesario para apoyar al yen.

Las multinacionales niponas han acusado la rápida apreciación de su divisa desde el inicio de la crisis económica, que hace sus exportaciones menos competitivas y daña sus beneficios una vez repatriados, y el tipo de cambio que contemplaban para este año era de un dólar a 90 yenes.

Desde hace tiempo los empresarios japoneses reclamaban al Gobierno una intervención para frenar la apreciación del yen. EFECOM

jmr-psh/av
 

soros

Well-Known Member
Ya nos tocaba una pequeña alegria, veremos hasto donde nos puede llevar de momento superar los 110 ya es un comienzo.
 

ffrhmd

Member
.......

Una de cal, otra de arena,

Fuente FT.

So 82 was the line in the sand? As the yen approached that level on Tuesday morning, strengthening to 82.88 to the US dollar, finance minister Yoshihiko Noda gave the order. Heavy yen selling ensued.

The immediate benefits were obvious. By 2pm in Tokyo the yen had dropped 2.6 per cent, pushing through 85 to the dollar. Equities roared; just seven stocks on the Nikkei 225 were falling. Gains were led by carmakers Mazda, Toyota and Fuji Heavy Industries, producer of the Subaru, which had been among the most vociferous supporters of intervention.

Longer-term, though, the outlook is murkier. The yen is still stronger than it was just over a fortnight ago; further weakening may require collusion with the Federal Reserve and the European Central Bank, which seem quite happy with their currencies where they are. Japanese exporters may now make a little less noise about uprooting domestic production, but they were doing that anyway, while the yen was much weaker. In 2008, before the current endaka, the average ratio of overseas production was 17 per cent, almost three times that of 1990.

Just as significant is the wider impact of Japan’s re-embrace of intervention after more than six years of abstinence. 82 may have been a threshold of convenience: there seems no better way for Naoto Kan to reach out to those 200 Democratic party lawmakers that didn’t vote for him in Tuesday’s secret leadership ballot, than to adopt one of his challenger’s flagship policies within hours of victory. But a move to shore up a domestic power base may exacerbate frictions elsewhere. Take the US House Ways and Means Committee, convening on Wednesday in Washington. How can it take a tough line on China’s currency manipulation, now that a founding member of the G7 has followed through on its threat to manipulate?

Notas.-Definición de Endaka
Solo 5 días antes,
Tokyo has been preparing the US and Europe for its potential intervention to counter the rising yen, according to Naoto Kan, prime minister.

Mr Kan’s leadership of the Democratic Party of Japan, and thus the prime ministership, is being challenged by Ichiro Ozawa. The strength of the yen, which hit a fresh 15-year high against the dollar this week, has become a central theme in the party election to be held on Tuesday.

Speaking on Friday in a debate with Mr Ozawa, Mr Kan said, “We are doing various things so that the US and Europe won’t respond negatively if Japan takes some sort of action.”

The focus on the yen in a tight party race has led to expectations of Tokyo intervening for the first time since 2004. One strategist suggested there was potential for Mr Kan to give the go-ahead as early as Monday in a bid to show leadership before the election.

During the debate, Mr Ozawa reiterated his view that Japan should strongly express its readiness to intervene in the markets. Mr Kan said co-ordinated action would be difficult given that both the US and Europe were happy to have weaker currencies because it helped exports.

“Intervention seems to be more of a political matter right now than an economic one,” said Junya Tanase, a currency strategist at JPMorgan. He said the possibility of intervention remained low but had increased recently.

Concerns among politicians and executives that the economy and company profits will be damaged by the yen’s strength have been intensifying as the currency notches up repeated 15-year highs.

However, strategists say the currency is not particularly volatile and Japan’s current account surplus makes it an obvious haven for risk-averse investors.

Fresh data on Friday showed Japanese economic output expanded more than initially thought in the second quarter, but the revision was too small to reclaim the title of the world’s second-largest economy from China.

The data showed capital spending contributed more to growth than initial estimates suggested. In April-June, Japan expanded 0.4 per cent seasonally adjusted, from the previous quarter, thanks mainly to capital spending being revised upwards.

Concerns about the economy remain as the potential effect of the yen’s strength hangs over business sentiment and second-half profits. The data confirmed that consumer spending contributed nothing to growth.

In an attempt to prod consumer spending, Mr Kan earlier in the day announced details of a Y920bn ($11bn) stimulus package aimed at helping to create jobs, while extending sales incentives for appliances and housing.

Economists are sceptical about whether this amount could have a palpable effect on the economy.



Ya nos tocaba una pequeña alegria, veremos hasto donde nos puede llevar de momento superar los 110 ya es un comienzo.
 
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ffrhmd

Member
Danke Elaine

Reflexion de Elaine. ¿Sacamos la bola, Jesús?

we let Japan walk into the US and stomp us. It comes as no shock to see the Chinese doing the same using the same tools and acting the same way. Duh. It just baffles me why people can’t see this.
 
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yago10

Member
Buenas,

A ver si lo hacen mejor que los suizos...

Aunque para ser sincero no creo que esto nos deva ilusionar demasiado sin el contexto no ayuda.

En el mejor de los casos y suponiendo que los 'grandes' no vayan contra ese movimiento, que podemos esperar??? dolar/yen a 90??? eso significaría que con el euro/dolar a 129 serían 116... que obviamente es mejor que 108 pero....

Lo importante, desde mi punto de vista es que esa subida del par sea progresiva y dure un par de meses... cuanto más brusca sea creo que será más efímera.

Un saludo y suerte!!!
 

ffrhmd

Member
Question

Elaine, Niall, (pasado) ... , Jesús (presente), Soros (futuro), ..

¿Suficientes claves para entender pasado, presente y futuro, no?
 
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JSSF

Member
Rápidamente.

A mí ha pillado la intervención, aun no siendo una sorpresa (o sí), pensaba que se había aplazado nuevamente (dos lunes atrás -creo recordar-, amagaron la intervención. Supongo que presiones internacionales, y montaron el paripé de crisis política que terminó ¿ayer?) hasta los $/Y = 80.

¿Se estabilizará en la cota inicial de 85? Es de esperar movimientos de ida y vuelta (al margen de lo que hagan los bancos centrales). Esta volatilidad puede dar mucho juego…. Por otro lado, era uno de los requisitos que yo estimaba necesarios cuando aconsejé abiertamente sobre la entradas-salidas al Y. Por cierto, el CHF no es mi toro. Ya aconsejé que se compararan las gráficas históricas con el €.Marco y con el Y. Idéntica evolución, sí. ¿Ha cambiado algo últimamente? Esa es la cuestión. Si calculáis % en subidas y bajadas, ya ni os cuento.

¿Quién se ha visto beneficiado por la intervención?

Parece que ni americanos ni europeos han movido ficha. ¿Y China? Pronto lo veremos.

Le estaban pisando la cabeza al € en exceso a c/p. Aunque aún yo esperaba como sabéis los 98-102 €/Y. esta jugada japonesa se ha anticipado a noviembre. Veremos.

Quizás resulte interesante ver el movimiento de nuestro par en 112´5 (si llega) porque es el objetivo de un HCHi en diario. Por supuesto, no perder de vista el SP500. Un apoyo en los 1111 daría, seguramente alas a nuestro par.


Me marcho, hasta luego.
 

batusi

Active Member
Como dice soros, eso es demasiado optimista. No puede haber 60.000 euros de ahorro porque aparte de la apreciación del yen hace mucho que el tipo de interés en euros cayó del 4%... y mucho. Yo lo tengo calculado con datos reales y después de 3 años, y habiendo entrado en 165, unos 9.000 euros de ahorro en esos tres años sobre una hipo de más de 300.000 €...
Si te fijas bien,la comparativa de ahorro a la que me refiero es con el euribor a un tipo de interés del 4% o más,evidentemente ahora como está el interés en europa ese ahorro no es real,pero también es verdad que ese interés en europa es algo excepcional y lo normal es que la tendencia sea la de volver a niveles del 4 o 5%,ya se que aún no va a ser,pero que la tendencia del euribor de aquí a no mucho tiempo será la de subir,algo que en japón es imposible practicamente.A ese punto es al que me refiero el ahorro no ahora.
 

wopingo

Member
Si pasa lo mismo que con el franco, que mucha intervención pero se fue al garete .... pues ya sabemos, .... todos al agua que se hunde el barco.... (joder con el que no quería intervenir!!!)
W.
 

cimbalin

Member
China vs Japón

Hola yente:

Como sabéis, soy un iletrado en esto de las finanzas, pero me "divierten" -y más me divertirían si no tuviera la casa en juego-. En mi opinión -de profano-, Japón acaba de declararle la guerra -financiera- a su odiada China. En esta contienda yo voy con los japos, pero me temo que los chinos son mucho más fuertes. Si los chinos deciden aplastar, aplastarán. Pero también puede pasar que los chinos vean -o ya previeran- negociete en este movimiento más que previsible y estuvieran preparados para recoger frutos.

A ver qué fuerzas tiene Japón, entonces, y qué fuerzas China. Lo veremos en próximos días. Sólo puede quedar uno.
 

ffrhmd

Member
Un artículo del 98, ¿ya llovió verdad?,que conviene leer.

There is a compelling need to learn the difference between the dangers of currency devaluation in an inflationary world and the benefits of currency devaluation in a deflationary world.

There is a compelling need for the International Monetary Fund, finance ministers, central bankers, market analysts, and headline writers to learn the difference between the dangers of currency devaluation in an inflationary world and the benefits of currency devaluation in a deflationary world. Policy makers, far more accustomed to an inflationary world than to today’s deflationary world, have failed to make the distinction. That failure has cost Asia and now Russia dearly. Some market analysts and newspapers continue to create dangerous and unnecessary confusion about the cause of falling stock markets worldwide. Headlines are trumpeting the view that global equity markets are falling because of currency weakness. This makes no sense and seriously muddles cause and effect.

We must understand why currency devaluation has a bad reputation and yet how it can play a constructive role. In a far more typical inflationary world of excess demand, currency devaluation is perilous and often counterproductive. A sudden devaluation--like that by the British in 1967--raises the cost of foreign goods and shifts demand onto a domestic capacity that may already be over-strained. Unless a very tight monetary policy accompanies currency devaluation in a world of excess demand, the shift in demand induced by a weaker currency away from foreign producers and onto domestic producers will only push up prices even faster without reducing an external imbalance. Thus, the IMF insists on a tight monetary policy after a devaluation. A tight fiscal policy may also be required to keep the government sector from absorbing resources that are slated to produce more exports for the demand increased by devaluation.

Deflation, Devaluation, and Demand
In the less typical world of deflation that characterizes Asia, including Japan, and an increasing share of the global economy, devaluation can be more constructive. Once again, devaluation shifts demand onto domestic producers and away from foreign producers. But, with excess capacity, there is no need for a tighter monetary or fiscal policy. Pursuing such policies may be destabilizing if they reduce aggregate demand for domestic output more than a devaluation raises it. Devaluation in a region of chronic excess capacity such as Asia might do just that. And so the initial application of restrictive IMF programs in Thailand, Indonesia, South Korea, and even possibly Russia this summer produced deflationary results. With no attendant fall in currency values, the tight monetary and fiscal policies merely increased excess supply.

Given global excess capacity, devaluation is a zero-sum game: it shifts demand onto devalued currency countries and away from stable (revalued after others devalue) currency countries. Yet, in a world like today’s with strong demand growth still present in the United States and some countries of Europe, devaluations in Asia can be and have been helpful in preventing overheating in the stronger economies. Naturally, if the excess supply and deflationary pressure in one part of the world like Asia get too large, a global excess supply through large currency revaluations may result in the rest of the world. The risk of this outcome has risen significantly with Japan’s decisive movement into the excess supply camp since 1997. Japan, accounting for about one-fifth of world output, brings the share of deflationary Asia in world production to about one-third.

The beneficial shifting of demand from countries with an excess supply to those with excess demand has been reflected in equity markets. The Asian crisis and plummeting currencies have been a great plus for U.S. and European equity markets. Between October 27, 1997--the day of the 7 percent one-day equity market sell-off, when market pundits began to notice that Asian economic problems could hurt earnings growth--and July 17, 1998 (the recent peak in Western equity markets), the U.S. stock market rose by 35 percent while European equity markets, led by Germany’s DAX index rise of 65 percent, surged even more. These climbing equity markets mirrored the constructive transfer of demand away from overheating economies and onto stagnating economies, encouraged by the devaluation of the currencies of stagnating economies.

Still, in the light of this positive relationship between weak Asian currencies and strong Western stock markets, newspapers are attributing the early August drop in global equity markets to a decline of the yen and possible devaluations of the Chinese yuan, not to mention the weakness of the Russian ruble. But Asia is simply in a deflationary spiral, and the currency weakness there is a symptom of the failure to address the problem, not a cause of weak stock markets in the West. The new Japanese government has made few changes in fiscal policy while proposing virtually no proactive steps to deal with the banking crisis and the accompanying 1 trillion dollars’ worth of bad loans on bank balance sheets. Currency markets are despairing of any Japanese reflation that might alleviate the banking system problems and push up private sector spending. That is why the yen is falling.

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ffrhmd

Member
........

..........

The Currency Peg
In China and Hong Kong, financial and commodity market deflation is accelerating. Since Hong Kong chose to "do whatever is necessary" to maintain the currency peg with the dollar, the stock market has been forced down by tightening credit and higher interest rates: the market fell 65 percent from its high of last year and 15 percent between mid-July and mid-August alone. But the lack of currency adjustment and the fear of further deflationary pressures are pushing down the Hong Kong stock market.

In the midst of this perilous situation, the Hong Kong Monetary Authority decided in mid-August to treat the symptoms rather than the causes of its deflationary malaise. On August 14, the HKMA began directly to purchase Hong Kong stocks that had been plunging because of the deflationary pressure from the tenuous peg of the Hong Kong dollar to the U.S. dollar. This effort to prop up the stock market is doomed to fail since it reverses the withdrawal of liquidity from Hong Kong’s financial sector entailed in selling U.S. dollars (purchasing Hong Kong dollars) to support the Hong Kong currency peg. By directly purchasing Hong Kong stocks, the authority is protesting the deflationary impact of its own defense of the Hong Kong dollar. With the massive excess capacity in Hong Kong’s hotel, real estate, and shipping sectors, a sensible alternative would be to let the currency float down and stop the HKMA attempt to underwrite the stock market.

The obsession with pegged exchange rates as a solution to problems in emerging markets and in Asia has been costly. Ever since Thailand resisted devaluation with higher interest rates in June 1997, a parade of countries, including Indonesia, South Korea, and now Russi a, has followed the same disastrous path. The recent $22.6 billion IMF package of relief for Russia was aimed at pegging the currency and giving the Russians time to design revenue collection to pay for their bloated government expenditures. But most Russians and foreigners wanted to abandon rubles—around 50 billion dollars’ worth—and the fresh infusion of dollars from the IMF package only prompted them to move more rapidly. Simultaneously, a lack of confidence in the Russian government to collect taxes and cut expenditures led to the rapid sales of Russian stocks and bonds. With Russian assets and ruble collapsing, the Russian government August 17 declared that the ruble would be allowed to float 30ÿ40 percent above the existing range. In effect, the government defaulted on its short-term ruble-denominated obligations and imposed restrictions on currency transactions.

As the Russian situation, along with developments all over Asia, has clearly demonstrated, there are no neat and clean solutions to the serious problems confronting Asia and the emerging markets. Pretending that holding currencies stable will somehow make the problems go away has been a disastrous error, akin to treating symptoms instead of causes.

Stability the Issue?
Under most circumstances, currency stability is a desirable goal, especially for developing countries. A stable currency tends to attract capital inflows, which thereby lower the cost of capital and enhance capital formation and growth. Unfortunately, the basic problem in Asia has been too much capital formation, resulting in huge excess capacity and requisite price cutting by countries attempting to minimize the losses associated with persistent excess capacity.

South Korea is a prime example. It has virtually eliminated imports while pressing for maximum exports. Because the country has more than enough capacity to satisfy any domestic needs, South Korea is desperately attempting to use that capacity by selling more into global markets. But Korean sales of products like rolled steel at any price put extreme pressure on other producers in China and elsewhere. Hence, markets begin to expect defensive devaluations in countries like China. The Chinese resist any notion that they might devalue and back it up with intervention and, as in Hong Kong, higher interest rates. As the higher interest rates put further downward pressure on local real estate and stock prices, headlines scream the negative results in financial markets.

The realization of the extraordinary weakness of Japan’s economy and its banking system--encumbered with 1 trillion dollars’ worth of bad loans and unable to perform normal banking functions--has intensified the Asian crisis over the past several months. Japan is 60 percent of the Asian gross domestic product; with domestic demand collapsing, the weaker currency is merely a sign of the market’s assessment that the Japanese must sell more products outside Japan to avoid an even weaker equity market. Since the new Obuchi government, coming into power at the end of July, made clear the inadequacy of Japan’s response to its serious shortage of domestic demand and serious banking system problems, the Japanese yen has flagged. Therefore, the markets have anticipated the need for further depreciation of the yen as financial markets weaken worldwide. The frail yen is not a cause of the infirmity of financial markets globally. It is merely one of the symptoms of underlying forces--primarily a lack of demand in Asia, especially when weighed against the large stock of excess capacity there--that are pushing stock prices down.

Somewhat ironically, the solution to Asia’s problems will probably involve a still more debilitated yen and possibly more debilitated Chinese and Hong Kong currencies. The Japanese need desperately to reflate by aggressively printing money to a point where Japanese consumers will believe that prices will actually rise over the coming year and therefore reward them for spending more money now rather than hording. A large, reflationary increase in the Japanese money supply will shove the yen down until higher spending helps the economy to recover. A lower yen will put downward pressure on the Chinese and Hong Kong currencies.

Continuing Misunderstandings
The weaker currency scenario is preferable to the alternative approach. Like the rest of Asia, the last thing Japan needs is more of the wrong kind of investment. In Japan’s case, the wrong investment has been the objective of more than 70 trillion yen of public works expenditures over the past five years, much of it added to excess capacity in the public sector, just as Japan’s investment boom in the 1980s produced excess capacity in the private sector. Surely Japan’s elaborate system of bridges to barely populated islands and its paved streambeds are not contributing to economic strength in Japan or the rest of Asia.

The confusion over Asia’s unusual excess capacity problem--more investment is not always best--and the impact on exchange rates has been aggravated by a careless financial press. One day a major financial newspaper published a front-page story intimating that the decline of the yen was pushing global markets down; the previous day it had published an editorial suggesting that a falling yen was preferable to the alternative: "a meltdown in Japan." If a falling yen can help prevent a Japanese meltdown (which it can do), then a falling yen should not be identified as the cause of falling global markets.

The misunderstandings about exchange rates and their relationship to the deflationary environment in Asia probably stem from a misinterpretation of the role of currency devaluations of the 1930s. The Great Depression is often associated with the competitive devaluations or "beggar thy neighbor policies" followed by countries desperately attempting to increase their market share in a deflationary world of shrinking markets. But, then as now, falling exchange rates were a symptom, not a cause, of the excess supply problems that plagued many countries. Britain’s arbitrary decision to return to the gold standard in 1925 at a sterling price of gold that severely overvalued the currency triggered a deflationary cycle that spread to the United States and the rest of Europe, and culminated in the Great Depression. The British were not solely to blame for the Great Depression, but the attempts by other countries to maintain their pegs to sterling and gold contributed to the deflationary environment.

Once markets began to sense the desperate problems of excess capacity in much of Europe and eventually in the United States, currencies fell largely because of the need to increase demand. When global excess capacity exists, no fall in exchange rates, which only reallocates demand from one country to another, can eliminate the deflation problem. Hence, the 1930s saw a number of currency devaluations associated with chronic excess capacity as more and more countries joined the quest to attract shrinking global aggregate demand to their increasingly idle production facilities.

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ffrhmd

Member
...

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Today we seem to assume that if we do not allow the symptoms of excess supply (weak currencies) to emerge in Asia and Russia, somehow the problem of excess capacity will go away. It will not go away and can be remedied only by ratcheting up demand while limiting new additions to excess capacity. That is why support for a stable exchange rate that cuts the cost of capital and thereby helps to increase investment and growth is counterproductive in the current excess supply situation in Asia. The last thing that Asia needs is more investment. What it needs instead is more demand for the products that past investments in capacity can produce. Hence, monetary stimulus--printing money, not just ramming interest rates down--is preferable to fiscal stimulus, which often is complicated either by passive measures such as tax cuts or by pork-barrel measures such as the ridiculous construction projects pursued by the Japanese government over the past seven to eight years.

Today’s confused headline writers in the financial press should be writing that the decline of the yen and weak financial markets are all symptoms of a desperate need for monetary stimulation in Asia. Currency weakness in a deflationary world can be a plus since it defines reflation. The sooner we get over the mistaken notion of trying to divide a group of symptoms such as falling currencies and stock prices (all caused by global excess supply) into cause and effect categories, the sooner we will have a better understanding of the problems in Asia and global financial markets.

Some guidance from the U.S. Treasury along these lines would certainly be helpful and preferable to engineering more packages like July’s disastrous $22 billion IMF package for Russia. Asia needs to reflate. Robert Rubin and Alan Greenspan should stand up and say so before deflation reaches America and Europe.
 
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