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poe Donating Member (554 posts) Send PM | Profile | Ignore Fri Jan-28-05 09:46 PM
Original message
Japanese Bond Traders Trying To Keep Dollar From Collapsing?
Edited on Fri Jan-28-05 09:50 PM by poe
If fiat money falters, we may have to go back to oxen as our medium of exchange. In that event, I trust, the Federal Reserve will have an adequate inventory of oxen."
- Alan Greenspan, The History of Money
Jan.29 2005-The conspiracy may be to the liking of the Bank of Japan, which has a reputation of dealing most ruthlessly with speculators who oppose its policy of a weak yen. It prints yen clandestinely at no cost to itself. The bank's acquisition of bonds is therefore a windfall. These bonds were accumulated during earlier decades, in consequence of the US government twisting the bank's arm not to buy gold with unwanted dollars, which is what Charles de Gaulle would have done. The Japanese know only too well that their hoard is so enormous that the chances of getting rid of it in case of a dollar crisis are nil.
The conspiracy of the Fed and the Bank of Japan provides the favorable backwind to their speculation which, without it, would be nothing short of suicidal. But with the backwind, it is extremely profitable, especially in view of the weak dollar, which improves the terms of trade of yen sellers and dollar buyers beyond their wildest dreams.


A bull market in bonds is the sine qua non of the deflationary spiral. Deflation is greatly aggravated by central bank intervention in putting more money in circulation through open market purchases of bonds. The central bank hopes that the new money will flow to the commodity market. Speculators forestall it by buying the bonds first. The new money, thus intercepted and diverted, flows to the bond market instead of the commodity market as hoped by the central bank. Interest rates fall, and linkage makes prices to fall with them. Contra-cyclical policy backfires. No wonder, its author, John Maynard Keynes, was ignorant of the linkage. If the conjecture about the conspiracy between the Fed and the Bank of Japan is correct, there is an insatiable demand for dollars, especially for falling ones, by bond speculators. The Fed is the quartermaster general for the coming depression that may make the Great Depression rather tame in comparison.

www.atimes.com
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acmavm Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jan-28-05 09:50 PM
Response to Original message
1. Why is not the horrible truth about the dollar and the possible collapse
of our economic system not on the front pages of every newspaper in this country? Is it that people are too frigging stupid to understand how this administration is manipulating the money market and letting the dollar fall to the point where even the Chinese are saying it's untrustworthy or what????? When are people going to notice? Whe you need a wheelbarrow of the damn things to buy a pack of gum?

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nagbacalan Donating Member (93 posts) Send PM | Profile | Ignore Fri Jan-28-05 09:54 PM
Response to Reply #1
3. The Plunge Protection Team will save the day. Right?
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PROGRESSIVE1 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jan-28-05 09:53 PM
Response to Original message
2. I would find it hard to believe that Japan would prop up the dollar...
knowing that if it were to "collapse" they'd be screwed over.

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Lydia Leftcoast Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Jan-29-05 10:28 AM
Response to Reply #2
8. Well, it keeps their exports affordable in the U.S.
:shrug:

The yen has been hovering around 102-103 to the dollar for a couple of months, and if the dollar falls below the psychological barrier of 100 yen, it may plunge into the low 90s (as it did briefly in the early 1990s) and cause real headaches for Japanese companies that export to the U.S.
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Polemicist Donating Member (299 posts) Send PM | Profile | Ignore Fri Jan-28-05 10:50 PM
Response to Original message
4. Sounds like a hard money adherent....
A gold bug. Regardless, he has some basic flaws in his logic and understanding of capital markets that make me discount that entire article as bunkola.

His statement...

"Deflation is greatly aggravated by central bank intervention in putting more money in circulation through open market purchases of bonds. The central bank hopes that the new money will flow to the commodity market."

Federal open market operations in purchasing bonds, isn't deflationary. It's inflationary. He's got it back wards. When the Fed purchases a bond, it's actually placing more dollars into circulation, which is inflationary.

When the Fed sells bonds, it takes dollars out of circulation which could be deflationary if taken to extremes. But the actual effect is to reduce the level of inflation, or create disinflation. The Fed is very careful not to induce deflation, as their monetary control models fail to work in an deflationary scenario.

This guy doesn't know what he's talking about. The forces at work are way more complicated than his relatively simplistic model. Savings are now international and profits and capital flow borderlessly around the world seeking the highest rate of return. That just happens to be in America, due to our high economic growth rate and high increases in productivity. I'm sure there's speculation going on in currency markets and the Bank of Japan has endeavored to prop up the Yen for decades. I would guess that the Yen/bond carry he spoke of, isn't a "connivance" of the Fed and Bank of Japan, but more opportunism by currency traders.

I am concerned about the drop in the value of the dollar, but it was actually too high for quite a long time, and had room to drop. It will help domestic industry become more competitive and after awhile, increase employment and exports, thing we really need help with.



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salvorhardin Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jan-28-05 11:39 PM
Response to Reply #4
5. That's making a big assumption
I am concerned about the drop in the value of the dollar, but it was actually too high for quite a long time, and had room to drop. It will help domestic industry become more competitive and after awhile, increase employment and exports, thing we really need help with.

That statement assumes that increased employment and exports is what the investor class wants. All available evidence says it isn't. What is there to export when we don't manufacture anything? Heck, about the only thing we're exporting today is our entire manaufacturing infrastructure as entire factories are disassembled and shipped over to China. How can employment be increased when there isn't anything for workers to do? We can't all schlep grease at McD's or stock shelves at Wally World.

In short, the investor class and the CEOs make their livings off short term increases in stock value. It doesn't matter how that's accomplished and if your company is incorporated in Belize it doesn't really matter what currency you trade in. The investor class has no incentive to build domestic industry, while at the same time Japan, Europe and every other country in the world does have incentive to make sure the US dollar doesn't go under since they own so much of the United States. For the US dollar to tank it would have grave economic implications for them.

Of course, the investor class doesn't care about this either. After all, they are only interested in short term gains so what do they care if the world economy goes to hell in a handbasket (with them throwing the basket into the hellmouth)? They will have made their nut and after the world economy has tanked they will have the power too -- just in time for a return to good old fedalism (with better marketing of course).
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porkrind Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Jan-29-05 01:40 AM
Response to Reply #5
6. "the investor class doesn't care about this"
That's right. This is the reason we need thoughtful and involved government to regulate business. Our current situation in the U.S. has allowed business to become corrupt and cannibalistic.
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mulethree Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Jan-29-05 10:16 AM
Response to Reply #4
7. not out of circulation
"When the Fed sells bonds, it takes dollars out of circulation which could be deflationary if taken to extremes. But the actual effect is to reduce the level of inflation, or create disinflation"


It takes dollars out of circulation - briefly - until the money is used to pay some bill.
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Up2Late Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Jan-29-05 09:10 PM
Response to Original message
9. The End is Near
Don't Kid yourself, This SUCKS! :hurts:
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