Skip to comments.There Is No World Currency War
Posted on 02/13/2013 8:37:17 PM PST by ExxonPatrolUs
All this chatter about a so-called global currency war is utter nonsense. All that is happening is the Japanese are wisely taking steps to increase liquidity and depreciate their vastly overpriced yen. They are doing this in order to avoid deeper and deeper deflation. That deflation will sink the Japanese economy for years to come if remedial actions are not taken.
Among all the big economies, none needs quantitative easing more than Japans. All the Japanese have done so far is make cheap loans to banks, but with no concerted QE. But QE is coming this spring, when Prime Minster Abe appoints a new Bank of Japan head man.
Mostly through jawboning, the Abe government has lowered the yen in round numbers from about 77 to the dollar to roughly 93 to the dollar. Its about a 20 percent change. Long overdue. My guess is the yen will wind up around 120 to the dollar as the year progresses.
To suggest that this is inflationary is a complete fantasy. It is aimed at stopping deflation. Over the past three years, nominal GDP in Japan has been roughly flat. In other words, total spending for the economy has been nil. Thats a recession. And a long one at that. (In some sense, Japan needs to recover from a 20-year recession.)
(Excerpt) Read more at nationalreview.com ...
OPEC Has Already Turned to the Euro
February 18, 2004
...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.
US Imports of Crude oil (1) (2) (3) (4) (5) (6) Year Quantity (thousands of barrels) Value (thousands of US dollars) Unit price (US dollars) Average daily US$ per € exchange rate Unit price (euros)
3,471,066 74,292,894 21.40 0.8952 23.91 2002 3,418,021 77,283,329 22.61 0.9454 23.92 2003 3,673,596 99,094,675 26.97 1.1321 23.82
As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.
As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar’s decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC’s members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.
The same principle applies to all exports.
And that is why so many countries are adjusting their currency value.
It is not a war, it is a race to the bottom, like lemmings in order to keep their export markets.
The oil exporters can and do run counter to normal market forces because it is a seller’s market.
That is about to change, not this year but within the next several years.
Rumors are rampant here in Colombia....the dollar has tanked against the peso. The US carried the Colombians credit for several years, drug war yrs.
Now the Colombians are enjoying a booming economy but concerns are the peso getting too high and of course the US gov’s actions on various fronts.
More printing, which caused deflation and enabled deficits, will solve the problem it created? Don’t think so. Same problem US
OPEC prices in Euros, iow there’s a conscious (though unadvertised) policy of keeping crude price-stable in Euros; they aren’t doing this singlehandedly of course, but their overriding reason is to keep western Europe from turning to another supplier, e.g. from helping Russia enhance production (existing field enhancement, new drilling).