With the exception of emerging market countries in trouble like Brazil and Russia, and complete hyperinflation basket cases like Venezuela, can anyone name a central bank that genuinely wants a stronger currency?
Today, the Bank of Japan is at the top of the whiner list of strong currency complainers, despite the obvious mathematics.
Bank of Japan Governor Haruhiko Kuroda warns Current Yen Strength Risks Harming Japan Recovery“.
Speaking to reporters in Frankfurt Monday, Kuroda also reiterated that BOJ policy makers won’t hesitate to expand monetary stimulus in order to achieve their 2 percent inflation target. The central bank’s board left settings unchanged at a meeting Thursday, spurring a nearly 5 percent, two-day surge in the yen against the dollar.
“There is a risk that the yen’s current appreciation brings an unwelcome impact on the economy,” Kuroda said on the sidelines of an annual gathering of finance chiefs from members of the Asian Development Bank, which he used to lead. “We will be closely monitoring the impact of financial markets on the real economy and prices.”
The yen has climbed 13 percent against the dollar this year, the best performance among its developed-market peers. It reached an 18-month high of 106.05 per greenback and was at 106.13 as of 8:32 a.m. in Singapore.
Japan’s economy is at risk of sliding into its second recession in two years after contracting in the final three months of 2015, while inflation remains far from the BOJ’s target. One gauge showed consumer prices retreated at an annual 0.3 percent pace in March, the biggest decline since April 2013, the month that Kuroda initiated his stimulus program.
Yen Perspective
Between January 2012 and May 2015, the Yen declined a massive 39.43% against the US dollar.
What more did Bank of Japan Governor Haruhiko Kuroda expect?
Mathematical Idiocy
It is mathematically impossible for every country to simultaneously devalue their currencies vs. every other currency.
Yet, the Bank of Japan, the ECB, and the Fed all want to do just that.
Moreover, the belief that inflation generates growth is absurd in and of itself.
Yet, here we are.
Amusingly, one of the ways Japan seeks to increase inflation is an “outing” process of corporations that do not raise wages.
For my rebuttal, please consider Is Anemic Wage Growth Stifling the Economy?
Mish Solution
I am willing to go way out of my way for central bankers to get what they want. I repeat my sure fire solution for Japan to get the inflation it seeks.
I propose negative sales taxes!
For details please see Mish’s Sure Fire Proposal to End Japanese Deflation: Negative Sales Taxes, 1% Monthly Tax on Gov’t Bonds.
Mike “Mish” Shedlock
I would say the Swiss enjoy the tax haven and power of a near gold-backed currency. They tried to pin to Euro, but thats a currency more crappy than USD. In the end they gave up. The Swiss are struggling however because their main industries are lumber and hyroelectric power to trashy French. Who woulda thunk that?
The whole world tries everything but to let their banks eat their own cooking. Hilarity ensues. It’s not too funny really. Jokes on us.
All paths lead to shrinking the finance sector world wide.
Helicopter drop; finance sector shrinks by credit contraction. Borrowing to survive is no longer necessary.
Recession and bankruptcy; finance sector suffers by debt default unless CB bail them out again, at ten times the 2008 level. So, currency crisis.
Massive infrastructure build out with monetized fiscal deficit financing; Government doesn’t borrow from banks in this scenario. Finance sector shrinks. Japan tried this first in 1992. Finance sector complained. Things changed to keep them happy.
I think this is why Mish predicts a currency crisis, and I worry about war. Government is beholden to a doomed finance/banking sector that refuses to suffer until something breaks. Something definitely must break, and soon.
Praise the bankers and pass the Prozac.
We must hold on.
We must hold on.
All countries except India seem to be plagued by the elderly who add nothing to the velocity of money. Does this mean that it might be Soylent Green time?
I believe it is the other end of the age spectrum that needs trimming. 6 to 8 children per family does not seem to be the answer on a fixed planet.
What first world nation averages a birthrate over 6, pray tell?
There are only 3 countries in the whole world that average over 6, as far as I know, and the life expectancy in those countries are not at the top of the list. You may want to look elsewhere…
I’ll eat anything, if I can put hot sauce on it.
russia in trouble? Really? mish drinking the coolaid from western msm already!
I am long Russia
You don’t read carefully
Russia is one of the few countries that actually wants its currency to appreciate
In the long run Bitcoin is the Russian currency.
You’re half way to social credit Mish with a negative sales tax which is just a less efficient way of implementing a retail discount. Of course because depreciation is a large ADDITIONAL cost of production and there is no current means of bridging the macro-economic gap between it and individual incomes except to borrow which unfortunately just adds more systemic costs….the problem will still persist. Unless a universal dividend is implemented which adds neither cost to the individual nor the system. Come on Mish, you can see that. Become an actual social crediter. Why you can even integrate social credit with Austrian economics by making the retail discount 30-40% so that deflation is a fait accompli. Social Credit is NOT socialism after all. It fits seamlessly within profit making systems. After you drop the unworkable and unethical aspects of present economic theories you’re free to integrate only the truths, workabilities and applicabilities of the opposing orthodoxies and come up with a third, more unified and humane whole.
“After you drop the unworkable and unethical aspects of present economic theories you’re free to integrate only the truths, workabilities and applicabilities of the opposing orthodoxies and come up with a third, more unified and humane whole.”
Human nature never changes. Cycles cannot be eliminated.
You’re right about cycles, but with those policies in effect the stability of the economy and the investment climate would be so much better than it is now that people would look around and say, “Why didn’t we break up the Banks monopoly on credit and their monopoly on the vehicle for the distribution of money….a long time ago.”
Human nature has an inherent and very powerful capacity to love and care….you just have to get outside of the prison of homo economicus….to see it.
Slowly, inch by inch, step by step, I’m beginning to grock what you are proposing. Keep posting. It’s interesting.
Yes, that’s an Abbot and Costello reference.
Mish, I love the suggestion. It allows the banksters to declare the battle for inflation won, since the businesses don’t have to discount, which would show up in deflation rate, and the negative sales tax is as direct-to-consumer injection of capital as one could possibly hope.
This stew has quite a few all-new ingredients. Is it substance, or just flavoring? Hmmmm.
get rid of legal tender laws and people will drop the “official” currency, only converting to it at the last minute to pay their taxes.
Mish, is there any correlation between a nation’s economic direction and its currency’s direction?
Inflation is the easiest thing in the world to create… print money, put in helicopter, dump onto serfs below. I realize it’s “against the rules”, but if it becomes serious, look out for helicopters. In the end, rules are for serfs.
“if it becomes serious, look out for helicopters.”
the minimum/low wage serf walking to work … gets hit in the head by a bundle of cash.
A) Does he continue on his way to work?
or
B) Say “Eff it” to job and decides to blow his new found wealth?
Mushroom cloud where Business used to be.
How’s that again? Let’s say low wage ‘serf’ gets $50,000. He figures he is set for life so he stops going to his $8,000 a year job. Business blows up because? If he is so low skilled and so low wage he couldn’t have been that essential to the business running. He has $50,000 in cash so he is probably buying a lot more stuff than when he just had a low wage job.
Connect the dots
All the low wage serfs will quit their jobs.
Who will work?
Where will they spend their money when all the McDonalds/Walmarts close due to no employees?
Anyone proposing helicopter drops is playing checkers in a chess reality world.
“Where will they spend their money when all the McDonalds/Walmarts close due to no employees?”
FAIL. What you’re describing is a supply crunch. People have money but McDonald’s can’t supply burgers because they can’t find people to flip them. What happens in a supply crunch? Prices go up. But where’s the inflation? It’s not here nor does it seem to be getting here any time soon.
“The yen has climbed 13 percent against the dollar this year, the best performance among its developed-market peers”
well, looks like any “idiot” who bought (borrowing in $US) those negative yield Japanese bonds a few months ago … made a bundle.
100 yen to $US … possibly stronger on tap.
I never thought I would see the day when banks hated savers. What’s next? McDonalds hating kids?
McDonalds does hate kids, just look at what they feed them!
“It is mathematically impossible for every country to simultaneously devalue their currencies vs. every other currency.
Yet, the Bank of Japan, the ECB, and the Fed all want to do just that.”
So all three want to be lower than the others (and all others)….. RUT ROH
It is only a mathematical problem if all major nations want to devalue in order to boost demand by boosting exports. But if all major nations simply print more money then you have increased demand due partially to increased exports but MORE IMPORTANTLY due to the fact that there’s more money period. If you give me a $50 bill, I can either go out and buy stuff with it (which raises GDP) or I can ‘save’ it by buying paper assets like stocks (which normally doesn’t except in cases where companies are financing new investment by issuing stocks).
Brian – simply printing more money causes money to be worth less. In short order, if people spend it, businesses raise their prices and you’re back to square one, whining and pleading for another $50,000.00 because the money you once had doesn’t buy anything anymore.
Get off the printing more money. They’ve done enough of that. Raise the interest rates so that savers (who have been royally screwed) will go out and spend, and stop handing money over to people who’ll just go further in debt.
Propping up the idiots with no money does absolutely nothing.
backwardsevolution,
Money only becomes worth less if prices go up. If they don’t change then money is the same as it was before regardless of how much has been printed.
Savers have been screwed, so what? Does the economy need saving at the moment? Not if it has excess capacity. Savers are no different than any other supplier in the economy, they are awarded more when there’s demand for what they have to offer, less when there isn’t.
Brian – “Money only becomes worth less if prices go up. If they don’t change then money is the same as it was before regardless of how much has been printed.”
Simple supply and demand says that if people are scurrying around with $50,000.00 in their pockets and wanting to spend it, there will be increased demand and prices will go up!
“Does the economy need saving at the moment?” The economy has always needed saving. The last 30 years has been nothing but a credit binge, driven by people who should never have been given loans in the first place. These are the people who have absolutely ruined the economy, not savers.
Some people have worked very hard their whole lives, spending and saving some, just so they wouldn’t be a burden on anyone in their retirement years. They didn’t go out and buy whatever they wanted on credit. They actually saved for what they wanted. Now their money, say $150,000.00 (which used to be a lot of money) has been inflated away. It’s worth hardly anything now, and yet they worked very hard for it.
Are you telling me that we should screw them, but save you? I might say the same back to you: “Does the economy need more credit at the moment?” No, the economy needs to get back to fair market value, which it has been unable to do because of all the manipulation by the Fed. It will correct, it always has.
“Savers are no different than any other supplier in the economy, they are awarded more when there’s demand for what they have to offer, less when there isn’t.” Yeah, and there sure as hell would be demand if not for the Federal Reserve. They’ve been bailing the banks’ and your ass out (and your ass was bailed only because it needed to be to save the banks – they could care less about you).
The Fed has picked winners and losers, and they’ve turned the whole economic system on its head. If not for them, the banks would have gone under and fair market value would have reared its pretty head.
It’s nice to be on the winning side, especially when you absolutely don’t deserve to be. But hey, enjoy it. It’s not gonna last.
“Simple supply and demand says that if people are scurrying around with $50,000.00 in their pockets and wanting to spend it, there will be increased demand and prices will go up!”
Not quite. If tomorrow McDonald’s sells 5% more burgers, they will probably not raise prices 5%. In fact they may not have to do anything. Suppose every day they open up a box of 1000 frozen burger patties and cook all of them but only sell 900, tossing the 100 extras in the trash. If one day there’s 5% more burgers demanded, they can meet that demand just by tapping their wasted capacity. Only after capacity is exhausted are they confronted with the need to bring more capacity online and there’s where prices may go up.
“The economy has always needed saving. The last 30 years has been nothing but a credit binge, driven by people who should never have been given loans in the first place. ”
No it doesn’t. When corn prices are low the economy doesn’t need more corn so farmers who planted it suffer. Saving is no different and when you talk about a ‘credit binge’ you are by definition talking about a savings binge too. No one borrows $1 unless someone else happens to have $1 and chooses to save it rather than, say, buy a burger.
“They didn’t go out and buy whatever they wanted on credit. They actually saved for what they wanted. Now their money, say $150,000.00 (which used to be a lot of money) has been inflated away. It’s worth hardly anything now, and yet they worked very hard for it.
Are you telling me that we should screw them, but save you? ”
I’m not following this at all. So let’s say someone had $150K back in 2008 but instead of buying a McMansion for $1M via a subprime loan, he left it in the bank and lived without credit. Let’s say his brother also had $150K and didn’t save it but went the route of credit up the wazoo. Where are they today?
Well the guy who got the McMansion is either rebuilding his credit after a short sale or is struggling to pay off his underwater mortgage. The guy with $150K has excellent credit, can go out and buy that McMansion if he wants it today for $600K or do whatever $150K can buy you these days…which is just about the same stuff it could buy you back then since inflation has been 0%.
With this in mind, please very carefully explain how the first guy is ‘screwed’ and the second guy has been ‘saved’?
It has NOTHING to do with “boosting exports”. That is a fig leaf.
It is all about INFLATING AWAY the unpayable debt, and more importantly, the unpayable, unfunded future liabilities.
Even an idiot like me can see that clearly.
This idiot sees that too.
The major scheme of the central banks is overlooked. It is not the relative value between various nations’ value of currency that is so important. It is the central bank’s hidden scheme to profit from inflation by their involvement in credit expansion (book entry money) within the nation.
In the US, the Federal Reserve embezzles $3 billion daily from the US government using the FRBNY’s exclusive control over the disbursements of funds received from the auctions of Treasury securities. Ref. 31 USC 375.5. The receipts of the $9 trillion annually from auctions is in large part to roll-over existing Treasury securities (about $8 trillion). Primary Dealers are tasked with collecting the maturing and called securities. The accounts are client accounts; they are not operational accounts which are reported to Congress in the Annual Report. Money from roll-over securities is credited to a government account; i.e., there is no increase in money in circulation (inflation) or an increase in the National Debt from their sale.
Securities auctioned for deficit spending (identified as a small percentage on auctioned roll-over securities) must be credited to an account other than a government account to result in inflation and an increase in national debt. The funds are embezzled by (hidden) owners of the Board of Governors. A privately owned corporate body is not required by the SEC to identify ownership or publish corporate records. The embezzled funds amount to $3 billion daily.
[Ownership was hidden because earlier European central bankers were deseized, physically abused, and exiled during resulting revolts.]
Audits of the Federal Reserve are conducted in accordance with guidelines established by the BOG. Clients accounts are never been publicly audited.
This scheme was brought to Jekyll Island by Warburg. It is undoubtedly the same scheme perfected by Rothschild centuries before. The ECB has shown trappings of the same scheme. It is a Ponzi scheme that is inherently destined for bankruptcy.
There is your hidden profit of central bankers. Ref: http://www.scribd.com/doc/48194264/rip-off-by-the-Federal-Reserve-revised