Currency Wars Return, 1930s Style…
The balance of power now rests with Japan, according to the bank, as Japan’s policy-makers’ more dovish approach looks set to bring the world a step closer to a currency war.The Bank of Japan doubled its inflation target to 2 percent in January and made an open-ended commitment to continue buying assets from next year. This follows a leadership change, with new Prime Minister Shinzo Abe openly calling for aggressive monetary stimulus from the country’s central bank.
…
“While a currency war is not our base case, the new-found commitment of Japan’s policy-makers does raise the risk of retaliatory action to keep the yen weak,” he said.
“The experience of the 1930s suggests to us that such large currency crises are likely triggered by domestic issues, and that they do create distinct winners and losers. EM (emerging market) policy-makers are already gearing up to make sure they remain on the winning side, but the balance of power for now rests with Japan.”
Will Japan’s “Attempted” Reflation Succeed And Will It Spill Over Into Full-Fledged Currency War?
Yesterday we presented a simplistic analysis of why for Japan “This Time Won’t Be Different“, a preliminary observation so far validated by the just announced Japanese December current account deficit which was not only nearly double the expected 144.2 billion yen, printing at some 264.1 billion yen, but was only the first back-to-back monthly current account deficit since 1985.
In short – at least in the first month of Abe’s great reflation attempt, not only did trade post another whopper of a deficit, but so did the broader current account implying that much more Yen weakness will be needed to generate the structural reforms sought by the new Prime Minister.
Fed Has Bought More U.S. Debt This Year Than Treasury Issued
(CNSNews.com) – So far this calendar year, the Federal Reserve
has bought up more U.S. government debt than the U.S. Treasury has issued.On Dec. 31, the total debt of the U.S. government was $16.4327 trillion and then-Treasury Secretary Tim Geithner announced that the government had hit what was then the legal debt limit. Last week, however, Congress enacted a law to suspend the federal government
debt limit until May 18, 2013, and allow the administration to resume increasing the debt.By the close of business on Wednesday, Feb. 6, according to the U.S. Treasury, the total federal debt had climbed to $16.4799 trillion—an increase of $47.2 billon for the calendar year.
Top London Properties Now Worth More Than All Rest of UK…
Lessons From The 1930s Currency Wars
With Abe picking his new dovish playmate, and Draghi doing his best to jawbone the EUR down without actually saying anything, it is becoming very clear that no matter what level of bullshit histrionics is used by the politicians and bankers in public, the currency wars have begun to gather pace. Japan’s more open aggressive policy intervention is the game-changer (and increasingly fascinating how they will talk around it at the upcoming G-20), as if a weaker JPY is an important pillar of the strategy to make this export-oriented economy more competitive again, it brings into the picture something that was missing from earlier interactions among central banks of the advanced economies – competitive depreciation. The last time the world saw a fully fledged currency war was in the early 1930s. Morgan Stanley’s Joachim Fels looks at what it was like and what lessons can be drawn for the sequence of events - there are definite winners and losers and a clear first-mover advantage.Via Morgan Stanley, Back to the 1930s? What Would a Currency War Look Like?
What did the currency war of the 1930s look like?
No comments:
Post a Comment