Who’s hurt by cheap money? The British! They aren't in the Euro to profit from handling money from currency to currency and they are good at it. And I have nothing against making money.
With capital spreading more evenly, the British cannot charge what they used to, for a product that is widely available. Japan is flooding the market with capital.
The British, however, are salivating for a flight to “quality”, where by a crisis in a poor country triggers capital flight and they gorge in moolah.
But continuing like this carry trade status quo, pretty soon the British will have to think about working and making stuff to earn a living. They are taking a cut of every money that moves from place it is plenty to places where it is scarce. This is not longer a way to make a living.
Priting money, as Japan does, hurts the lender. The lender doesn't have the upper hand. Compare that when capital was hoarded and scarce. It was spread only under a very controlled manner and only to governments.
Globalization changed that. If you want to invest in Brazil you're welcome to take the risk. But the whole country will not be at risk from loans it would have taken to feed state-owned enterprises that practice political pricing and can never pay the principal, defaulting and creating a crisis every ten years.
Japan is fighting not to return to the insignificance it came from. It does with the only two things it has. Capital and an industrial base. Combining the two to keep going.
It needs countries to buy its Toyotas cars and NEC microwave equipment. Its sogo shosha no longer operate in products, they operate in services. They brought Japan to where it is and will try to keep is up there.
Blame countries with high interest rates for carry trade. Countries such as Brazil, keep an interest rates high to attract money to fund the public deficit. The Turkish lira has strengthened some 25 percent, despite a large current account deficit, slowing growth, a partial suspension of European Union entry talks, anxieties about this year's elections and persistent inflation
Investors now enjoy benchmark interest rates of 17.5 percent - some of the highest in emerging markets and 4.5 points higher than in Turkey's closest rival market Brazil.
Why the G7 do not lambast Lula to keep interest rates too high? |
