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Currency War

After nearly three decades of stagnation, Japan in 2013 went all-in, ordering its central bank, the Bank of Japan, to buy pretty much every bond on the market with newly-created yen. The BoJ’s balance sheet — a rough proxy for the amount of money it has created and dumped into the economy — soared at […]

 

China: Major Devaluation Coming

by John Rubino on July 27, 2015 · 7 comments

The whole “market economy” thing is turning out to be a little trickier than China’s dictators expected. To set up the story: After the 2008 crash the country borrowed about $15 trillion (an amount that dwarfs the US Fed’s quantitative easing programs) and spent the proceeds on history’s biggest infrastructure program. This pushed up the […]

 

Was Greece Always Part Of The Plan?

by John Rubino on July 19, 2015 · 11 comments

Since its inception, critics of the eurozone have been pointing to its incomplete nature — everyone uses the same money but keeps their own national budgets and tax regimes — and speculating that this “fatal flaw” would doom the system. Other observers, however, gave the euro’s creators more (Machiavellian) credit and assumed the initial version […]

 

US Nearing Recession, Dollar Falling Hard

by John Rubino on May 13, 2015 · 25 comments

The dollar soars by a record amount versus the euro and the yen in 2014. And economists predict strong growth in 2015. Really? If a country can have a rapidly-appreciating currency with all the benefits that that confers, and strong economic growth with all the obvious advantages that that confers, why wouldn’t everyone be going […]

 

When a country pegs its currency to a bigger one like the US dollar, it in effect outsources its monetary policy to the operator of that other currency. This confers several benefits, including the enforced discipline of the other, presumably more rigorous monetary regime and the simplicity of letting someone else stress over controversial policies […]

 

Most talk of currency war focuses on the problems caused by countries devaluing their money. This does indeed cause a lot of problems, especially long-term once everyone figures out the game and starts front-running it by preemptively dumping their currency. But in the short run, for every loser there’s a winner, in the form of […]

 

As pretty much everyone is now aware, US Q1 growth was way below expectations. And the only reason it was even marginally positive was because businesses expanded their inventories at a record rate. Here’s a chart from Zero Hedge comparing the economy’s growth with that of inventories: In other words, if US businesses had just […]

 

US Factories Crushed By Strong Dollar

by John Rubino on April 24, 2015 · 6 comments

Government statistics are always suspect, for at least one obvious reason: Modern economies are way too big and complex to measure in real-time. So virtually every number is revised in the months after its release, frequently to the point of saying something very different. But by then lots of new data has come out and […]

 

Is The Credibility Bubble Bursting?

by John Rubino on April 19, 2015 · 15 comments

In a fiat currency system, perception is, by definition, everything. Paper money has no intrinsic value. So the people saving it and accepting it in exchange aren’t expressing faith in the money itself but in the competence and honesty — and power — of the institutions managing it. Let that faith erode and those slips […]

 

Welcome To The Currency War, China Edition

by John Rubino on April 13, 2015 · 11 comments

Here’s one for the “seriously, you’re surprised?” file: China pegs its currency, the yuan, to the dollar, the dollar soars, taking the yuan with it…and fewer foreigners buy suddenly-much-more-expensive Chinese products. Duh. China’s Export Engine Loses Steam, Adding to Growth Pressure China’s exports unexpectedly slumped last month, eroding the outlook for one of the economy’s […]

 

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