Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Chispas who wrote (66521)	7/10/2007 12:31:59 AM
From: John Metcalf	Read Replies (1) \| Respond to of 116555

Chispas, thanks for posting Mr. Schiff's article. Though I find his point of view a little bizarre, it is interesting and thought-provoking. It is a glaring omission that he did not mention the many years of deflation that have occurred in Japan. BOJ has made hundreds of statements about pursuing monetary policy to end deflation, so that banks and businesses can become solvent again. BOJ policy not only supports the USA, but also the Chinese currency to which USD are linked. It is conceivable that BOJ is looking at its export-driven economy, and seeing the opportunity to muscle three of the world's four largest economies into cooperation. Hyperinflation has not appeared in Japan. In fact, deflation is only ending recently. I would like to see Mr. Schiff's speculation about what Japanese households will do when Japan raises rates and yen finally begins to rise. Will they panic out of USD, or will BOJ spend yen to prevent the denouement? My bet has been, for many years, that BOJ will continue to do the latter. This bet is very large for me, so I would love to hear if I am wrong.

To: Chispas who wrote (66521)	7/10/2007 10:53:05 AM
From: forceOfHabit	Respond to of 116555

Chispas, An interesting article, but I find this part very incomplete: The only logical answer I can offer is that the Japanese realize if they stop the flow of global liquidity they will destroy the dollar and the U.S. economy. Why would the Japanese care if they cratered the US dollar/economy? Well the short answer (on the dollar at least) is that they hold so many of them, they would suffer large losses themselves. But that argument is circular since they only accumulated their large dollar holdings because they were protecting the dollar in the first place. (Unless you think the usually far sighted Japanese just kind of drifted into this dilemma...) Similarly, for the economy, a big hit to the US economy would undoubtedly rebound on Japan. But the US is no longer the sole big economic driver in the world today, and there ought to be other markets for the Japanese to pursue. Look at the rapidly rising Chinese for instance. And there it is (I think). A clue to why the Japanese would prefer to prop up the US - as a counterweight to the Chinese. China/Japan have a long and acrimonious recent history (look up the rape of Nanking and anything from WWII). Imagine that your nearest neighbor was 10 times your size, you had had bitter battles in the past, and although you had long been far wealthier, they just won the lottery. Not a very comfortable situation, and one in which you might well do everything in your power to suck up to the nearest other big guy even though he lives a block away. Just my $0.02, ymmv. habit