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FreeMarkets (40.96)

The Chinese MUST Float there Currency



March 18, 2011 – Comments (10)

Bernanke has said it.  Obama has said it.  Geithner has said it.  Economists have said it.  And now, leading by example the G7 has decided to intervene and stabilize the Yen, because floating a currency isn't good if the markets decide it is worth too much or too little.

Oh the hypocritical web we weave!


10 Comments – Post Your Own

#1) On March 18, 2011 at 8:24 AM, Melaschasm (< 20) wrote:

LOL  Great post!


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#2) On March 18, 2011 at 8:49 AM, russiangambit (28.67) wrote:

It is like balancing the budget. Everybody wants it, as long as someone else pays for it,

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#3) On March 18, 2011 at 9:59 AM, OneLegged (< 20) wrote:

Do you mean "their" currency?

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#4) On March 18, 2011 at 10:08 AM, FreeMarkets (40.96) wrote:

OneLegged (<20) - don't quit your English teaching position.

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#5) On March 18, 2011 at 1:09 PM, rfaramir (28.64) wrote:

It doesn't say what they did to put the Yen down, though. Did they increase the value of their own currencies (selling Treasuries and sucking up dollars/euros) or sell Yen on the market?


Normally, central banks 'acting' means printing more of their money (in various ways), but this seems to be the opposite. I'm just not clear which kind of opposite. 

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#6) On March 18, 2011 at 1:16 PM, JakilaTheHun (99.92) wrote:

I'm not sure why the Japanese wanted to intervene.  From a fundamental perspective, the Yen should have gone down, but it's actually beneficial for the Japanese for it to go up in the near-term.

It's almost like a knee-jerk mercantilistic reaction from them.  They always want a weaker currency, regardless of the circumstances. 

Given that they will probably need to dramatically increase imports to rebuild, why would they want a weaker currency?  Even if their exports suffer during rebuilding, it's vastly more beneficial to have a strong currency to buy stuff for cheaper. 

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#7) On March 18, 2011 at 1:18 PM, EnigmaDude (60.92) wrote:

Apparently the Japanese are buying dollars to bring down the Yen:

Reuters - Japan bought billions of dollars to restrain a soaring yen on Friday, backed by action from European central banks as the world's richest nations moved to calm markets made nervous by Japan's nuclear crisis.


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#8) On March 18, 2011 at 2:46 PM, PeteysTired (< 20) wrote:

Japan bought billions of dollars to restrain a soaring yen on Friday

Do they use borrowed dollars to buy those dollars?  I'm so confused.  It seams like the countries of the world are broke and borrow money to keep afloat.  Central banks are waiting in the wings with mythical money.

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#9) On March 18, 2011 at 3:35 PM, FracturedVision (< 20) wrote:

PeteysTired -

 A dollar spent is a dollar earned.  If a government is running a deficit, that means the private sector has net savings (in a completely closed economy, trade deficit not withstanding if all gov'ts are running deficits). 

Since the private hoarding or demand for yen is increasing (think about the impact buying food or gas is having on tangible currency in Japan right now), the governments which are already in debt need to deflate their currency by buying dollars to keep their exports internationally competitive (also without raising interest rates). 

Forgive me if I missed sarcasm, I am tired today.

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#10) On March 18, 2011 at 4:50 PM, FleaBagger (27.52) wrote:

I'm having a hard time understanding why it would be bad for Japan to have a stronger currency and be able to import more of what they need to fix their country at more favorable prices.

FracturedVision - if a gov't runs a deficit (not really an "if" anymore, is it?), it is usually (in every case I can think of or remember from history class) funded by inflation at the central bank, as with our Fed monetizing the national debt right now. Throughout the most of the past decade the U.S. had a negative savings rate in both the private and public sector, and only a portion of that came from foreign investment. Much of it was Fed inflation, especially in late 2008 (when, ironically, the private sector savings rate turned positive for the first time in years).

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