Japan about to devalue by 40%?

[Mega]

http://www.zerohedge.com/news/chines...en-devaluation
Mike

[Starving Steve]

Re: Japan about to devalue by 40%?

One de-valuation begets another, both with the nation that de-valued and with that nation's trade competitors. So, as the de-valuation adventure begins, an old (1960s- 1980s) Latin American-style era of unlimited and competitive de-valuations begins. And once the de-valuation adventure begins, it accelerates, and currencies become worthless and abstract everywhere..... The second phase of this de-valuation adventure begins when new currencies are introduced to replace the old and worthless currencies. The second phase, i.e, the phase of currency replacement, accelerates the de-valuation process because the public's trust in their central bank is lost. The new currency becomes worthless.

Many nations in Latin America tried a third and fourth currency replacement, and with the same result. Some of the classic (worst) Latin American hyper-inflations were in Brazil, Argentina, Chile and Bolivia, but the entire region was economically destroyed by these Keynesian economic policies.

What is really amazing is that Keynesian economics is still taught in universities as a reasonable and viable economic approach to solving trade issues, deficit issues, speculation and bubble issues, de-flation issues, etc.

[lektrode]

Re: Japan about to devalue by 40%?

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What is really amazing is that Keynesian economics is still taught in universities as a reasonable and viable economic approach to solving trade issues, deficit issues, speculation and bubble issues, de-flation issues, etc.

and whats even more amazing/scary is this: (POZ: think kbass is adding to his position?)

...........the day of reckoning has never been nearer. And to those who have grown disenchanted with the Kyle Bass view of an epic JGB bubble pop, it may be time to refresh your lost cost hedge. Because a devaluation, to be truly effective, will not be visible from a mile away: it will be sudden, and very, very shocking, unless the government opts for the worse of to evils - a bond market collapse.

Yen devaluation is likely to unfold quickly. A financial bubble doesn't burst slowly. When it occurs, it just pops. The odds are that yen devaluation will occur over days. Only a large and sudden devaluation can keep the JGB yield low. Otherwise, the devaluation expectation will trigger a sharp rise in the JGB yield. The resulting worries over the government's solvency could lead to a collapse of the JGB market. Of course, the government will collapse with the JGB market.

The day of reckoning for the yen is not distant. Japanese companies are struggling with profitability. It only gets worse from here. When a major company goes bankrupt, this may change the prevailing psychology. A weak yen consensus will emerge then.


Finally, no matter how it's spun, the outcome, whether a 40% JPY deval, or a JGB bubble pop, will have devastating consequences on both the regional, and global economy.

A yen collapse will impact China and South Korea most, just like in 1998. It will trigger substantial weakness in their industries. If a banking system succumbs, the shock can bring down an entire economy, as South Korea's experience in 1998 demonstrates.

Both China and South Korea have weak banking systems. South Korea's banking system is one of the most leveraged in the world due to high level of household loans. In 1998, a similar shock sank its banking system that was overleveraged with industrial loans. Now it is overleveraged with household loans. A shock could sink it again.

Overinvestment and a property bubble make China's banking system very vulnerable to such a shock. Unless China substantially increases the capital in its banking system, a big yen devaluation could cause China's banking system to sink. China suffers from overinvestment and a property bubble, as Southeast Asia and South Korea did in 1997. In terms of the magnitude of leverage, China's situation is much worse. Hence, a yen devaluation could wreak havoc to China's economy.

and then what happens to gold? (scared money again flows to US$ ?)
what, the BOJ doesnt have any to sell? and why wouldnt they sell a bunch?
(wonder if this is why there seems to be so much korean money floating around in HNL....)

dow 36000 anybody?

the turds all fired up: http://www.tfmetalsreport.com/blog/3...mr-ben-bernank
linking to another one at ZH that ends with this:
bernanke-says-more-accommodative-policies-needed-hints-new-qe


wheres my tinfoil....