Money Matters: I Was Right: This Is All About Strengthening Yen!

Elaine Meinel Supkis

Real quick story today: I was right! I was right! The engine of this month's banking collapse was from China because the yen is now growing stronger and all central banks but China are frantically trying to reset the situation so that it goes back to the previous status quo but this is impossible because China is retaliating against the G7 for trying to force the yuan up while keeping the yen artificially low. Just look at these headlines!

From Forbes:

It is official. The much-celebrated global carry trade, revolving around the low cost of borrowing in yen (at interest rates barely above zero), is coming unwound in response to the global credit crisis.

The money wheel is spinning in reverse, as the rise in the low-yielding yen is accompanied by sudden falls in various regional high-yielding currencies: the New Zealand dollar, the Australian dollar and, to a lesser degree, the Korean won.

“The flushing out of [the] carry trade has been dramatic for the past two days, particularly today,” said Irene Cheung, a Singapore-based currency strategist at ABN Amro. “We’ll have to see fluctuations, a quick breakdown before the market stabilizes. People are not going to come back so soon.”

Not one story is about how the Bank of China is trying to prop up the present system. I noted from day one, last week, China's total silence, China not dumping tons of FOREX reserves into the system. China has made it abundantly clear that the yen is too weak and at the beginning of August the IMF joined the G7 in insisting the yen is just fine and Japan can do whatever it wants. Suddenly, we have a banking crisis across the entire planet except for...CHINA AND RUSSIA. Bingo. The dog that didn't bark, as Sherlock Holmes noted, is the clue.

From Forbes:

The yen appreciated sharply Friday against the greenback as the unwinding of the carry trade accelerated. Other Asian currencies plunged, prompting intervention by a number of central banks across the region.

The Japanese currency was trading at 112.54 to the dollar at 2:50 p.m. in Tokyo, following a rise to 112.01 in New York overnight, putting it at its strongest in 14 months.

The Bank of Japan working in concert with the exporters and powerhouses of Japan, moved heaven and earth to weaken the yen yesterday. They shoved it down a tiny bit but as I predicted...with stunning accuracy (I have to boast, I am the only person on earth to foresee this correctly) the Chinese countermanded that move and forced the yen up again. I would like to say to everyone, trying to reinstate the 'carry trade' that is killing the US industrial base and putting us deep in debt is important and we should thank the Chinese for doing this!

Thank you, thank you, thank you! I have been yelling about the yen for two years during which many an economist told me I was stupid, the problem is the yuan. Well, it is the yuan but only AFTER we ream out the Bank of Japan! Then we can deal with China....and the only way to do that is to stop importing most of our energy, damn it.

From Forbes:

With the repricing in credit markets due to panic over the U.S. mortgage market, investors who have levered up on debt are having to sell off assets to pay off their loans, resulting in a stampede out of the Australian dollar, among other currencies, and a rapid strengthening of the yen.

Indonesia’s central bank confirmed it had intervened to support the rupiah, and there were reports from traders that Malaysia, the Philippines and Singapore had sold dollars to support their currencies.

The head of Japan’s Finance Ministry, Naoyuki Shinohara, said that the ministry was watching the situation carefully. Analysts speculated that Japan would step in to weaken the yen if it reached 110 to the dollar.

OK: we accuse China of manipulating their currency to make it weak. Yet article after article casually mention that the Bank of Japan is going to maniuplate the value of their currency! Just two damn weeks ago, the IMF sneered at China about 'manipulating the yuan' while being blase about Japan doing the same thing! Now they openly talk in fear about a strong yen! What the hell? Japan is not only the world's #2 economy, they are the world's richest exporting nation! Their export profits are way, way bigger than China's! They also have 0% inflation! So why is their currency weak?

HAHAHA. The Bank of Japan, intervening to save the yen from being strong will lose power because they have to deflate their country further which will weaken Japan further which will make China stronger and talk about a goofy situation for everyone! China knows Japan's game and will play this tit for tat until the Japanese kow tow in Beijing. They will, in the end.

From Bloomberg:

The U.S. Federal Reserve will cut the overnight target interest rate to 4.5 percent from the current 5.25 percent this year, Goldman Sachs Group Inc. economists forecast in a research note today.

One way to make money worthless. Inflation, meet balloon markets. We are so dumb, dumber than rocks. The present stock market is part of the destruction of our industrial base system. What is good for is stinks for America. The worse things go (outsourcing, inflation) the better it is for the stock market. They can go to hell. For the last 30 years, we have followed a course that is very dire for the nation all so that the stock market can flourish. We have to stop.

Headlines from the Nikkei:

Forex: Dollar Tumbles To Upper Y111, Euro Falls To Upper Y149, Tokyo

TOKYO (Kyodo)--The U.S. dollar fell to the lower 111 yen level at one point Friday, hitting its lowest level since early June last year, while the euro slipped to its lowest level since last November in the upper 149 yen zone as continued falls in global equities prompted market players to hedge risks.
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Stocks: Nikkei 225 Marks Biggest Point Drop In 7 Years

TOKYO (Dow Jones)--Tokyo shares plunged Friday on panic selling after the yen surged to 14-month highs against the dollar, causing investors to dump shares in major exporters, such as Honda Motor Co. (7267), on expectations that their overseas earnings will suffer.
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The headlines say it all. Incredible. We should note that what is good for the US is evil for Japan. This inverse relationship is based on an artificially weakened yen and it is ending, thank god. We had Bretton Woods II and the Plaza Accords, all frantic efforts to force Japan to strengthen the yen. Then the monetarists of the incredibly stupid University of Chicago School of Economic Wizardry took over with Greenspan and he and they all pretended open FOREX markets would revalue currencies relative to each other on a daily basis.

THIS IS A DISASTER. We go from currency collapse to currency balloon to currency collapse and all of Asia manipulates currency values and the FOREX reserves of many nations, starting with Miz Japan, have ballooned as they use this as ballast in their currency manipulation battles. As they figure this new system out, it gets more and more outrageous and impossible.

STOP. Just stop, everyone. The FOREX markets make money by destroying economies!

From Forbes:

Chinese computer maker Lenovo on Thursday announced that it would build new plants in Mexico and India at a cost of $31 million to ramp up production.

The world's third-biggest producer of computers plans to build its largest factory outside China in Monterrey, Mexico. It is expected to be operational by mid-2008 and will churn out 5 million units annually for the North and South American markets. It is expected to employ 750 people.

Lenonov bought IBM out. Everyone thought they were stupid. Hahaha, we cheated the Chinese. I said, the Chinese would make it work and return to sell computers here in America and watch out and as usual. I was right.

They are not moving out of China due to labor costs. They are moving into Mexico to take advantage of NAFTA.

I have to go to the doctor now. Everyone have fun!

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Comments

I was wondering how long it would take before Americans would be going to Mexico to find work.

By the way, Elaine, have you heard this interview? Where would you disagree with Hudson?

http://kpfa.org/archives/index.php?arch=21767

From Cold War to Class War
Interview with financial economist and historian, Dr. Michael Hudson. Liquidity crisis in the banking system; wiping out of credit; demise of the dollar; stock volatility; hedge funds; sub- prime lending, real estate tax versus labor tax, etc. Dr. Hudson has been appointed Chief Economic Advisor for the Kucinich for President campaign, and is writing a new tax policy for the United States.

Posted by: Hamburger | August 17, 2007 at 12:53 PM

The real value of the yen is around 80 to the dollar. Better buy your Toyota's while they still cost less than Mercedes and BMW.

Technology is today's great equalizer. China is spending and moving quickly to surpass the U.S. in technological innovation. The key is reengineering the way man uses energy. The U.S. model is designed wastefully, and intentionally so, as it feeds Big Oil. But China cannot afford with its 1.3 billion people to follow this path (neither can the U.S., which is one of the major reasons where it is today).

When China it finds the solution, as it surely must, the world system as we know it will change radically. When you have that many people you cannot afford to ignore the little guy. This is what the elite of America have forgotten (if they ever knew it at all). How can you live comfortably in Greenwich, Connecticut when 90% of the country is up in arms for lack of basic necessities.

Asians are used to this, they know hardship. They live it. But spoiled Americans have very little tolerance for discomfort. That can and will be a major problem in the years to come. As for Americas elite, well, they are neither American nor nationalistic. They worship manna and they will just live away from the trouble they created.

Posted by: Carlos | August 17, 2007 at 06:49 PM

Thanks, Hamburger, for the Kucinich advisor's link. He sounds really cool. Carlos, they worship the Golden Calf. We have to eat the manna while they live in the manor.

The shouting will be very loud when Americans can't drive their cars No Mo'e.

Posted by: Elaine Meinel Supkis | August 17, 2007 at 11:21 PM

Congratulations for your blog, I find it very interesting, I wonder if they know of any course that will allow me to make money with forex? Thank you for your reply.

Posted by: Automated Forex System | May 30, 2008 at 11:23 AM

automated forex system - shove it up your butt why don't you.

You seem to be nothing but a bot.

Posted by: Buffalo Ken | May 30, 2008 at 01:05 PM

Ka Kling !!!!!

that was a joke.

Gracious, we all need to hold onto our sense of humor.

Posted by: Buffalo Ken | May 30, 2008 at 01:07 PM

Thanks for the post mate.

Posted by: Forex Tracer | June 16, 2008 at 01:33 PM