Steve_L did a post on AUD/USD, which reminded me that six weeks ago I remarked that JPY looks a bit on the high side as well.
The BoJ finally intervened in the currency markets a day or so ago, and allegedly pushed down the value of JPY by around 5 cents against USD.
1. If we look at JPY against a basket of currencies, yesterday's move does not look spectacular on a five-year chart, if anything, JPY had been drifting down since my earlier post, from 1.20 to 1.17 last Sunday, it's about 1.14 as at today (click to enlarge):
2. The question is always: does the BoJ time its interventions to reinforce an existing downward move or do insiders cash in on a planned intervention, thus precipitating the downward move?
3. The other question is, how dumb are some people at the BBC? They mentioned it on Radio 4 yesterday morning, and the reporter announced quite earnestly that the BoJ has got lots of foreign currency reserves which it can spend to intervene in the currency markets. EPIC FAIL! A central bank only needs foreign currency reserves if it wants to prop up its own currency (see Black Wednesday) because you have to sell those reserves and buy your own currency; if a central bank wants to depress the value of its own currency, it does this by selling its own currency (which is can print at will) and using it to buy foreign currencies.
Or you can do like the wily insanely mercantilist Chinese or Germans and instead of printing your own currency, actually manufacture stuff that people in other countries want, sell it to them, and then lend them back their own money - because swapping their currency back into yours would push up your own currency and hence make it more difficult to export. Of course, beyond a certain stage, that small bit of marginal extra income you can earn from exporting gets wiped out by the constant erosion of the value of your foreign currency reserves, but hey...
Tuesday 1 November 2011
Japanese Yen Intervention
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7 comments:
You really ought to do a back-of-the-envelope on how the Greeks can rescue their state by replacing their income-tax-that-nobody-pays by an LVT. If people won't adopt an LVT even in such an emergency, when will they adopt one?
dearieme said...
What a good idea, then when the Greeks can't pay the LVT the state can confiscate their HOMES, give them all sorts of state benefits and rename the country EUSSR No1.
Dearieme, Mark may have different thoughts on this but in my opinion, this is one of the few cases where its too late for LVT to fix things.
Yes, on the one hand, LVT is Greece's best chance of raising the revenue without crippling their economy or risking rampant tax avoidance, not to mention outright evasion. But on the other hand, the basic problem is a lack of Euros in Greece, and since Greece can't print them, the only ways it can get them are by borrowing them from the ECB (which is just "kicking the can down the road"), by taxing them from the finite internal supply owned by its citizens and corporations (which can only go so far before leading to revolt or emigration), or by earning them via exports to fellow members of the Eurozone (which it is far from doing at the moment).
Now LVT would certainly help with the third option by improving the productivity of Greek industry but even LVT requires time to work that particular part of its magic. And I don't think that Greece has that much time.
Sure they could take out more long term bonds to put off the evil hour and implement a full Single Tax solution in the meantime to try and turn round their balance of trade in time to pay back the longterm bonds. But realistically it just isn't going to happen with the current government.
So whatever the solution (if any exists) might be, LVT could be only part of it.
Excellent last paragraph. And indeed it just as surely eventually goes wrong for mercantlits as for every other -ist/ism (except capitalism, of course). In the present case Germany is being made to bail out Europe to whom it sold lots of stuff financed indirectly by the rest of Europe borrowing money that the lenders thought was secured against Germany.
Same'll happen to China. Can't see quite the mechanism yet...
D, according to the CIA factbook, govt. spending is 49% of GDP and their current tax system raises 39% of GDP = deficit 10% (all these figures are broadly the same as for the UK!). But remember that back in 1999-00, the UK govt. only spent 35% or so of GDP, which is the sort of figure we should be aiming for.
From what I can see, their govt. spending is mainly welfare payments, in the wider sense, i.e. unemployment benefit, public sector non jobs and pensions (as corrupt as they may be, they spend far less on corporatism than the UK).
So there's every reason to assume that Greece, just like the UK, would be able to shift to a full-on LVT/CI system, because the CI would be a straight swap for their existing welfare system anyway.
Comrade F, you are becoming a parody of yourself :-)
If a state really did this and used the LVT proceeds (i.e. rent) to pay state benefits, then the state benefits would largely be spent on rents anyway, so it's a closed loop and in reality, not much would have changed.
D, for once, I disagree. The experience of Denmark in the 1960s show that the benefits kick in very quickly indeed, certainly within a couple of years. As a matter of fact they can print EUR, by simply handing out tax demands payable in EUR, which is them dished out again as CI, denominated in EUR.
L, I've lived in Germany, their national religion has two core beliefs: Germany must export and Germany must have low inflation.
The former leads to the latter, via the mechanism of a stronger currency, but this then chokes off the former again so it's an eternal balancing act, which, to be fair, they have managed superbly for the last sixty years.
Ireland ran a healthy trade surplus and had a better proportion of manufacturing:GPD than Germany.
"then when the Greeks can't pay the LVT the state can confiscate their HOMES"
If the Greek government isn't making people sell their HOMES to pay their unpaid income tax, it's not very likely that they will do so to pay their LVT is it? Anyway you still haven't answered my question as to what happens to your HOME in this country if you don't pay your income tax.
You are the only person who thinks that unpaid LVT necessarily leads to the loss of the home: all the rest of us are getting a bit bored of this particular straw man, why don't you do us all a favour and put on the bonfire on Saturday.
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