Thanks, I am merely wondering whether severe cuts in industrial commodity imports (in Japan relatively larger than in China, because Japan imports basically everything, while China has important domestic production) are a routine response to earlier overstocking (precautionary to be precise, based on inflationary expectations) or precautionary destocking (i e based on an informed expectation that demand in export markets will get much worse). The currency may have played part in this but historically, Japanese exports have proven to be pretty resilient. We may be talking about disappearing demand beyond price considerations here.

I did not mean to comment on the recent JPY appreciation directly.

Personally, I think JPY is around fair value right now. And of course exchange rates are an issue of diplomacy as well as economics in Asia. Nothing conspirational about that, but it should always be discreet..

I do not understand what you wrote to explain this statement, Rien. Would you please elaborate?

As far as I am concerned, there is nothing odd about what is happening in Japan. For years and years they succeeded in killing their own currency and the export conglomerates that de facto run Japan and has for the longest time, rejoiced.
No matter the endless liquidity BOJ were to pump out now (just as before), they are not succeeding in reversing the flight to safety, because the destruction in the US and Europe is bigger than the weakness they can create in yen, and ZIRP has become commonplace. After all, the Japanese savings are just too large not to look real good when that is the case. I also think they’ve realized their predicament and are pondering where to go next. And that is real interesting!

Anyywa, the exports have predicatably died, rapidly, and as there’s no plan B in Japan and hasn’t been for decades other than subway investments (or so it seems), you have a ‘hello’ to hard times for everyone, exporters now included.

The fate of yen was decided when Tokyo shouted higher than anyone else about China having to revalue at the July 2007 G8. Ever since then, they have not been able to get back to preferred territory, and when the damn broke for good in September 2008, how could the yen not rise violently with the dollar, and then against the dollar once investors saw what the US will be doing to the dollar? Its what many had simply been waiting for (I’ve had a few posts on here about the issue in the past, and I am not alone with that). If you consider this, Tokyo’s new facilitating approach to Beijing is no mystery either.

And yes, that sounds like some shadowy conspiracy thing, and we don’t like that, but everyone can go and make themselves a yen chart from then to now, and then they can plot in the time of Hu’s visit to Tokyo as well, where things were allowed to calm. You might not read it in the Western mass media, but it is how things get done.

Sorry for the long post Brad. Your blog is required reading and you’re doing an excellent job! Just wish the Japan/carry trade/currency manipulatoin issue had not been a blind spot in times prior to the crash – and I really think it was.

Regards,
Glen Mikkelsen
Shanghai

The key issue for sterling right now (there is insfficient empirical evidence that currency behaviour conforms to theory) is that it has (temporarily) lost its entry option into the Euro. During the past 10 years, UK could have entered if it wanted, i e its domestic politics were the only (and insurmountable) constraint). That is no longer the case and the UK is moving further away from formal acceptability. If the EU were to come to the rescue (which it may have to, if only because of Ireland and farm policy) Euro entry may well be off the menu, since that would set a precedent for others with fundamentally weaker credentials. This regardless of the fact that even now, the British public maintain their irrational attachment to this anachronistic politician’s toy..

What is happening in Japan is odd. The Japanese (and Chinese supply responses (and decline in imports of resultant industrial commodity markets until a few weeks ago) to the economic problems in their main export markets indicate either extreme precaution, an unwinding of precautionary inventory building (based on expectations of further industrial commodity price increases), bargaining posture, or combination of all these. I only hope it is not based on superior knowledge.

indian investor : i am starting to skip your lengthier contributions – purely as a time saving measure.

brad : mish (mike shedlock) has some pretty pie charts on the banks. now if someone could do those for banks’ fractional lending ratios. . . . that would be good. i read elsewhere that the u k banks are leveraged at 30:1. does that sound right ? am i mixing up my definitions ?

all : if the british bank rescues collapse what happens to japanese/british trade ? is the failure of a major economy rescue package bound to be a domino event ? so is unilateralism totally totally dead ? when is the peace conference ? paris in the spring ?

and if george soros makes another billion in a domino black swan event where would he put it ? does george soros understand complexity theory ?

and is black the new white ? (for swans )

the question on private savings in the US. If domestic savings do net get spent on Asian goods then they either get accumulated in cash/Treasuries or go into debt repayment. Debt repayment might be a significant element in overall savings rate. However the cash that went into the debt repayment most likely will end up in various securitisation vehicles, i.e. some of it will trickle back to FOREIGN private investors. How big is this amount of debt overpayments in the overall picture of global finance? Can it be that US Treasury reliance on foreign private investors is even higher – when you add together capital outflow from China, plus debt over-payments flowing to foreigners through securitisation vehicles? Many thanks!!!

You really need to stop treating politics and finance as some sort of James Bond movie. The first question you need to answer if you argue that Geithner’s comments were intended to get some Congressional authorization for debt monetization is to explain how it does that.

Indian Investor: Private bankers don’t make nationalistic lending decisions. They’re seeing a huge opportunity in sectors like urban infrastructure, power generation and telecommunications in emerging markets, and that’s where the global capital is flowing, behind the scenes.

No they don’t and no they aren’t. The thing about global capital is that the second you have any sort of panic, money gets rapidly taking out of emerging markets. The trouble with emerging markets is that they have more perceived risk, so the second people see any risk, they pull money out. This generally does awful things to the emerging market.

It is very dangerous for an emerging market to rely on foreign capital for economic growth, since that money disappears at exactly the wrong time.

Indian Investor: I’m not clear exactly what methods were used by the dominant banking cartel to trigger the 2008 Credit Panic.

That’s because the “dominant banking cartel” didn’t trigger it. The entire crisis started when 1) banks did stupid things 2) those stupid things killed one bank. There is a “power elite” but there isn’t a “dominant banking cartel.”

Indian Investor: As soon as Tim Geithner got nominated as the T-Secy, my speculation is that somebody has hired some private investigators to go and collect all kinds of information about this person, personal, professional, etc.

Well yes. The second someone is nominated *everyone in Washington* hires private investigators (and public investigators) to go through the personal and public lives of Presidential appointments with a fine tooth comb. This includes the Obama transition team, that hires lots of people so that if there is anything embarrassing, they can find it first and control the situation, and it was the Obama camp that called the media and released the information rather than have someone else do it.

Indian Investor: Any person can have some minor events or characteristics in his/her life where it can be bloated up into a major public embarassment.

Sure, and the job of any Presidential staff is to spot any and all public embarrassments and deal with them pre-emptively which is what happened in this situation.

China says : YoY GDP growth 6.8%
Reality : QoQ GDP growth -2+%

SAFE is now a deer caught in the headlights