Over the last year (or so) those same FCBs have greatly diminished that practice in what appears to be a private consensus to do so.
that sounds like just a guess to me (we have no way of knowing whatever private consensuses they may or may not have reached, behind closed doors; it is all just conjecture). keep in mind that these guys are not good buddies at all: the Koreans and the Chinese HATE the Japanese with a passion. the Japanese look down on Korea and are scared of China. (i follow the Japanese and Korean press and it is very amusing to see the little stories that make national headlines, whenever a Japanese, Korean, or Chinese "furriner" does something bad in one of their countries. just lately, a Chinese spouse of some Japanese guy supposedly killed a couple little Japanese kids for no reason. this is national news in Japan. many Japanese people really believe that the ethnic minority "Koreans" in their country, who amount to less than 1% of the population, account for the majority of the crime in Japan. Koreans believe equally goofy things about the Japanese. these guys are supposedly having a hush-hush backroom discussion where mutual trust is imperative?) there is no reason to think they trust each other and can easily form some kind of cabal. it is like believing Hamas and the Israelis can form a cabal.
one guess based on no evidence is as good as another. my personal guess is that the FCBs support the USD when USD needs it. last year, with everybody from Bill Gates to Warren Buffett short the dollar, it was a great time for USD to outperform. the market did the FCBs work for them. JPY/USD fell from 100 to 120. when Mr. Market does this job for you, why should BOJ do any more?
but when JPY goes to 105, then i think you will see BOJ back in action.
again, that is just a guess, in the fwiw dept. i will say btw in a small endorsement for my guess that it (the guess) has the benefit of not requiring any severe stretching of the imagination of what may or may not go on behind closed doors. it is the simplest possible explanation based on available evidence: sure, the FCBs like to manipulate their currencies (support USD when it is weak); but why should they do it when it's strong?
The USD is as strong as it is, in no small measure due to the US consumer buying the bulk of his stuff overseas.
honestly i thought that was why USD is supposed to be weak (since we have a huge C/A deficit). this is the moralizing line taken by goldbugs.
brings into question (perhaps) the wisdom of FCBs' continued holding of the sizable stores of USD and, perhaps, switching out those holdings for a fiat that isn't quite as extended credit-wise or into commodities which don't need to rely on fiat.
i assume by "wisdom" here you mean the "investment wisdom" of FCBs. but FCBs have no interest in being "wise" in the way a rational, profit-seeking investor is. instead, they have a national agenda. that agenda, as far as Japan and the rest of the Japanese-wannabes in Asia go, is to run a structural trade surplus based on an export-led mercantilist economy.
remember, Japan is the big success story of Asia, and they have been manipulating their currency since the 1960s! what has happened? they have become the world's premier exporter. the Koreans, who had a per-capita GDP on par with Chad in 1965 and used to be one of those countries listed in the back of magazines where you could send $10 a month to support a fambly of four, are now the second pre-eminent export-led Asian mercantilist. they copied the Japanese paradigm of exporting, suppressing domestic demand (you know electronic goods are really expensive in Korea! computers are a ripoff and people buy them overseas and take them home) and look how they've come from the third world to the first.
in these countries, the third-world lifestyle is very much within living memory (and still existent in large parts of China). this is a MUCH bigger concern to their CBs than whatever the market value on their USD "investments" is.
in sum, Asian CBs don't "invest" in USD; they opportunistically manipulate their currencies to support local export growth. can this go on forever? probably not. but Japan hasn't ended their addiction to the US after 40 years, and China is just getting started. sure, the US is run by nuts and we are profligate and have no right to our "easy ride", as the moralizing goldbugs would have it. but who said life is fair? one of these days, the game will change, but that could be many years from now, and one has to wonder if "many years" is equal to the time horizon of "investors" in gold stocks trading at 50x PEs. |
