Incomprehensible Shouting Named Official U.S. Language
Posted in Media.
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– March 19, 2011
Fiat Brothers to the Rescue
I have to say that I was perfectly correct yesterday, Japan did intervene in their currency market and now they have coerced their group of seven brethren to give them a helping hand. According to Bloomberg:
The Group of Seven will jointly intervene in the foreign exchange market for the first time in more than a decade after Japan’s currency soared, threatening its recovery from the March 11 earthquake.
Japan began the effort, sending the currency down 3.1 percent against the dollar at 9:34 a.m. in Tokyo. Each of the G-7 members will sell yen as their markets open, Japan’s Finance Minister Yoshihiko Noda told reporters in Tokyo today. The G-7 said in a joint statement after a conference call of its finance ministers and central bank chiefs that it will “provide any needed cooperation” with Japan.
Japan’s central bank also said in a statement that it will pursue “powerful monetary easing” as policy makers sought to reduce the threat the world’s third-largest economy sinks into a recession.
PRINT! PRINT! PRINT! PRINT!
Posted in Economics, Markets, Politics.
– March 17, 2011
The Rocket Yen
A 4% move in an equity market is large, but a 4% move in a currency market within seconds is massive. The Wall Street Journal is reporting that the Yen has strengthened as retail investors are exiting the carry trade:
Many retail investors, particularly in Japan, had put on highly leveraged trades involving selling the yen and buying higher-yielding currencies like the Australian dollar or the Brazilian real. But since the earthquake, the yen has soared, quickly turning the trades sour.
My own take is that we would have to be talking about some incredibly wealthy retail investors with impeccable timing. What is more likely is that there is a mass exodus of retail and institutional investors. More importantly is the near certainty that the Japanese central bank intervened as it saw its currency strengthen against the dollar by 4% in a split second. They certainly do not want their exports to appear uncompetitive when they have just been knocked down by mother nature.
- The Yen gave up all of its gain on its own? Really…
Posted in Conspiracy, Economics, Markets.
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– March 16, 2011
Earthquake to Push Japan into Default?
Japan’s debt level is in a league of its own. With estimates that Japan’s gross debt to GDP will reach 228% (before the earthquake), it is over twice the level of the United States. The devastation from the Earthquake is predicted to reduce Japan’s GDP by 2-3%. According to Robert Peston:
The sum that Japan needs to borrow this year is the kind of number that boggles the brain: if you add together both the maturing debt that needs to be repaid and new borrowing to finance the deficit, Japan needs to borrow around a third of its $5.5 trillion GDP, excluding very short term debt, or more than half its GDP including short term debt.
Japan has continuously been able to raise money through debt sales primarily because its own population has been willing to purchase the debt. The question really becomes whether there is a tipping point, especially when these same citizens need funds to rebuild their own houses and businesses.
Whether Moody’s and S&P will look the other way because the extra burden was caused by a natural disaster is a moot point because the credit default swap market has already lost faith in the Land of the Rising Sun:
Japan's default probability makes the US and UK look safe
Posted in Economics, Markets, Politics.
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– March 15, 2011
Nikkei Plunges for Second Day
With the news from the Japanese nuclear plants escalating, the Japanese market has shed another 6% for a grand total of nearly 15% since the earthquake on Friday.
Posted in Markets.
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– March 14, 2011
