In last night’s post, I wrote “everyone who was massively exposed to the YEN will have a big problem”. Well I wasn’t the only one who saw this. Today, the G7 finance ministers decided the US Dollar was too weak relative to the Yen.
This sounds great on the surface. After all, we can buy more of their stuff when the US Dollar is strong. Of course, that’s more stuff made and sold by them and not made or sold by the dwindling US middle class … but I digress.
So how do you go about making a currency roughly 6.5% stronger over night? You make a bunch of US Dollars out of thin air and trade those US Dollars for a WHOLE BUNCH of Yen. So now “We, The People” own a whole bunch of Yen. I hope you have enough room for those pieces of paper next to your GM shares. Bear in mind, this was a decision made FOR YOU by people who were NOT elected BY YOU. Is this bad? Of course it is. It’s not like they have a stellar track record … again, I digress.
So why did the G7 do this? Because they are TERRIFIED that Japan will have to sell off a large portion of its $877 billion stash of US Treasuries, weakening the dollar to never-before-seen levels.
On the other hand, if you’re one of those giant institutions who have money, and also have your finger on the pulse of the forex markets, you’ve probably just made a TON of money on the rapid change in USD to Yen. Sleep soundly in the knowledge that our implementation of capitalism has kept the haves above the have-nots.
The question now becomes how long will this multi-billion dollar robbery keep the Japanese stock market up? Hours or days?
The sad, despicable fact is that Japan needs a strong Yen right now so they can buy more blankets, food, shelter, thyroid tablets, and medical aid.
Do you have a different take on this? If so, please comment.