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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (3315)	4/1/2004 12:16:13 PM
From: russwinter	Respond to of 116555

funding for intervention comes from short-term bills (probably your FEFBs), and in the event that interest rates rise (in Japan), the interest burden will rise immediately and they will no longer be able to intervene. Effectively a monster carry trade. It worked well when currencies were more stable and UST were 5% plus. <not book interim losses> I posted quite an article about six months (I think, don't think it was last FY?) ago about how the MoF sent their "trading activity" up to the legislature. People had a fit because they lost money during the period. Prior to that govt has been getting some bonus revenue from this activity, so just looked the other way. But now with the magnitude of this intervention, and the mark to market losses mounting, I am not sure how much patience there is for this losing carry trade. Ultimately, the funding for the principal Foreign Exchange Fund (FEF) and FEFBs comes from the elected politicians, not just bureaucrats. Even little kids in Japan are reading comic books, suggesting this an American scam. news.tradingcharts.com