Worswick,
> Actually, we will get so pissed off at a trade balance up
> 2,000 % that we will take the yen back down to 80 per dollar. IMHO.
Seriously, do you think so?
I can imagine some industries and some groups howling about a weak yen and an increased trade deficit with Japan, but who in the United States and who in Japan would be helped or hurt by the Yen strengthening at this point?
Believe me, I really want to hear a convincing bullish case for the Yen, because I am short and all that I can come up with is gloom and doom. I worry about my objectivity when I can't make a good case for the other side.
One interpretation I have for the weakening Yen is that it represents the realization of previously hidden, concealed, unrecognized or unrealized losses that stand behind the Yen-denominated assets (postal savings accounts, pensions funds, stocks, bad loans, etc). In a way, Krugman's suggestion to SIN (Start Inflation Now! ;-) seems to be advocating a realization of these losses through inflation (ugh!), and "get on with it".
How is Japan going to Get Over It? Intentionally inflate the currency (destroying part of the wealth of an aging population preparing for retirement)? Deregulate, reform and move ahead (but how much political and cultural will exists for this fairly major change to happen)? Stabilize the currency (how can one do this without "fixing the system")? Strengthen the currency (how would they do this, and who would be hurt)?
As you can see I am have more questions than answers ;-)
- Daniel |
