Skip to comments.Japan stimulus will start currency war, say Chinese economists
Posted on 04/09/2013 2:43:42 PM PDT by Sawdring
Many of China's top economists are livid at what they view as an effective currency devaluation by Japan and are calling on the People's Bank of China to retaliate by weakening the yuan to defend itself in what they see as a new currency war.
These economists, including Tsinghua University professor Li Daokui and ANZ Bank's Liu Ligang, see Japan's plan to double its monetary base within two years as "blackmail" and have criticised the Japanese central bank's decision to open the liquidity floodgates to bump up the economy.
Liu said Japan's unprecedented easing programme, aimed at ending more than two decades of deflation, was "a monetary blackmail" targeted at other export-driven Asian countries such as China and that the central bank should sell more yuan and buy the US dollar to push down the yuan.
He also called on authorities to guard against a fresh wave of hot money into China's fragile financial markets, warning that Japan's move would reignite the so-called carry trade, under which investors borrow in low-interest yen and invest in high- interest markets.
"The massive monetary stimulus by the Japanese central bank could spell doom for other nations in the region," said Tsinghua's Li, a former adviser to the People's Bank of China.
"China could accelerate the freeing up of its capital account by boosting outbound investment in overseas equities markets, which could be an effective way of coping with the latest round of the global currency war."
Under a plan announced on Thursday, the Bank of Japan (BoJ) will double its monetary base to 270 trillion yen (HK$22.1 trillion) by March 2015 by purchasing 7.5 trillion yen of government bonds every month.
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Japan is giving the chicoms a taste of their own medicine.
This won’t end well for any of us.
They call it the race to the bottom.
How come we waited until Japan did something?
The balance of trade has swung (wildly) in China’s favor, yet we continue to trade and trade and trade.
Stop it. Bring back American jobs, and protect US workers.
Of course this is the start of a currency war, ironically with all sides doing their best to debase their currency out of existence. The result will be world-wide and uncontrollable hyperinflation. Unexpected, of course. (Actually, all will seem fine until a Black Swan event, and the. It will all go to cr@p very quickly.)
Real war will almost inevitably follow.
One of my students is a economics professor and he tells me that Abe’s policy is being very well received by the Japanese public, even though they realize it will mean higher prices in the days ahead.
I am still too dumb to understand why “deflation” is a bad thing (don’t we all want lower prices?) but he is convinced that unless Japan manages to get at least 2% inflation in the days ahead, there is a serious chance that the economy will simply “stall out”. Whatever that means.
So, China can go suck eggs. Abe is bringing the bureaucracies firmly to heel — which is something that many prime ministers have tried, but few have managed. If he can get the moribund economy expanding again, he stands a good chance of keeping the PM job for the next 10 years.
Seems like Japan has the stones to challenge the Communist Chinese.... while we still have liberal Free Trade Communists in this country still pushing blind obedience to Free Trade with Communist China
This will hit both Japan and China. There is a downside to devaluing the currency. Nobody likes devaluing currency. Nobody would want to keep their financial assets or make investment using a currency that is randomly being devalued. If you have stocks and bonds in Yuan you would want to quickly trade it for you something in US dollars or anything that is more stable. Foreign investors will drop their overseas Chinese bonds like hot potatoes. Same for Japan.
Why weaken your currency? Let the Japanese devalue the Yen and then go in and buy the country up, settling it with Han Chinese.
Real war will almost inevitably follow.
The dominoes are falling. Cyprus was the tipping point and the signs are everywhere. The smart people are bailing out of fiat and buying precious metals. The US Mint is setting records this year for sales of American Silver Eagles and 90% silver is disappearing. Worldwide financial collapse will lead to chaos, widespread violent civil unrest and finally to war.
Historically in America during economic downturns wages and prices rose and fell as the country grew through business cycles. In the 20th century under a pro-bank credit regime prices cannot be allowed to fall as it bankrupts banks - their leveraged assets are devalued.
So what you have is our economy today: goosed by taxpayer financed debt so we can save banks. Instead of allowing the market to punish the foolish it is the prudent being punished.
You are right about that last part. Currency wars end when, and only when, the real war starts. Someone has to lose the currency war and the result for them will be starvation of their people. They will be left with only one choice. Take by force what they cannot get from currency devaluation. Emerging markets unable to devalue will also be hard hit but they do not have the military might to do anything about it.
What do you teach?
English, naturally. Just a couple of private lessons a week. By trade, I am an editor for scientific and academic papers.