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Currency War

Welcome to the Currency War, Part 9: What’s Wrong With These Pictures?

by John Rubino on May 10, 2013 · 13 comments

Japan’s currency devaluation has worked beautifully. The yen is plunging, Japanese stocks are soaring, and the current account surplus — the main measure of a country’s ability to trade effectively — is way up: Japan Current-Account Surplus Climbs as Abenomics Sinks Yen Japan’s current-account surplus rose in March to the highest level in a year [...]

Welcome to the Currency War, Part 8: US Issues Variable-Rate Debt

by John Rubino on May 6, 2013 · 7 comments

It’s easy to understand the attraction of things like adjustable-rate mortgages and teaser-rate credit cards. They give you cheap money up front and a few years of breathing room in which to raise your cash flow to cover the eventual higher payments. Sometimes this works out for the best. But frequently not. If your cash [...]

Welcome to the Currency War, Part 6: Japan Gets Explicit

by John Rubino on December 26, 2012 · 13 comments

Forget about the fiscal cliff. December’s big story was the ascension of a new leader in Japan whose platform is aggressive inflation: Global Currency Tensions Rise TOKYO — Japan’s incoming prime minister fired a volley into increasingly tense global currency markets, saying the country must defend itself against attempts by other governments to devalue their [...]

Welcome to the Currency War, Part 5: The Dollar Gets Serious Competition

by John Rubino on November 26, 2012 · 25 comments

Not so long ago the dollar was the world’s only reserve currency. Everything else was one (or several) steps down in terms of safety and liquidity, and major financial institutions acted accordingly, accumulating dollars for the risk-free parts of their portfolios. Global demand for dollars was, as a result, effectively infinite, which meant the US [...]

Welcome to the Currency War, Part 4: Corporate Revenues Plunge

by John Rubino on October 25, 2012 · 13 comments

The Eurozone meltdown has sent capital pouring into (temporarily) safe haven currencies like the US dollar, which rose by nearly 12% between October 2011 and August 2012. This sounds like a good thing for the US but it’s not, because US multinationals lose big when the dollar pops. Assume, for example, that you’re making computers [...]

Welcome to the Currency War, Part 3: US Corporate Profits Plunge

by John Rubino on August 1, 2012 · 20 comments

The euro is down big lately, which is to be expected. Over-indebted countries have traditionally used devaluation to keep their debts from crippling them. The problem is that a cheaper currency is only a temporary fix because it invites retaliation from everyone else. For a real-world example of this process in action, consider what just [...]

Welcome to the Currency War, Part 2: Massive Euro Devaluation

by John Rubino on June 28, 2012 · 32 comments

As everyone knows by now, Greece, Spain and the rest of the PIIGS countries can’t fix their economies because they can’t devalue. If they were still using their old national fiat currencies, so goes the conventional wisdom, they could just mark them down by 30% and instantly see their exports surge and their deficits shrink. [...]