Japan's yen doubles up as high yielder and safe haven

The majority of people in Japan don’t have enough to live on, let alone ‘hedge’!

Yes! Money, money! Money, money!

These policies of zero or negative interest rates will at some point in time catch up to us (collective humanity). At that time it is most likely the most cataclysmic financial event in history will occur and we will see a depression like we have not imagined. Think Venezuela or Weimar on a global scale. This is the apolitical result of governments kicking the monetary policy down the road for the last several decades, Covid May by the match that lit the fuse

Yes! Money, money! Money, money!

and Japan has boatloads of it.

Tokyo-engre

i completely agree. The biggest bubble ever seen is currently inflated on the worlds stock markets and the day it will blow up, toilet paper will be more valuable then stocks and most currencies.

the traders and investors know this but they all want to profit from the bubble and hope others get to pick up the pieces as they get out on time. A dangerous illusion for most

Hard assets are the only real safe haven.

Wish I had cash instead of a mortgage.

Michael Pettis answered this better than I do. Why this is not a good thing?

https://twitter.com/michaelxpettis/status/1187692746288451590?lang=en

https://twitter.com/michaelxpettis/status/1314573897866637314

https://twitter.com/michaelxpettis/status/1311890974633754627

https://twitter.com/michaelxpettis/status/1301031995586129920

Hard assets are the only real safe haven.

Aside the hard assets, USD is still a safe haven because it is backed by the US military who is willing to occupy and invade any oil country that refuses the USD Petrodollar regime. Only Russia is immune from an American invasion.

The USD is probably the only non-hard asset in existence that is considered a safe haven.

These policies of zero or negative interest rates will at some point in time catch up to us (collective humanity). At that time it is most likely the most cataclysmic financial event in history will occur and we will see a depression like we have not imagined. Think Venezuela or Weimar on a global scale. This is the apolitical result of governments kicking the monetary policy down the road for the last several decades, Covid May by the match that lit the fuse

It is likely that Europe and Japan will absorb all of the upcoming fallout after the QE at the FED is over. Just look what happened after the Nixon shock in 1971. The US forced all of its allies paying the overdue money from the years of Marshal Plan. The Plaza Accord. If there will be a financial stagflation under Biden or Trump in 2024, the US will diverge its responsibility and damages to its allies as it has always been.

My theory for such massive QEs under Trump era, agreed by both DEM and GOP, is to halt the rise of China. Many financial institutions have allowed China to borrow heavily and irresponsibly. China has the power to default all debts and crash the world financial institutions overnight. This is why Deusche Bank, HSBC and Goldman Sachs are licking the CCP's boots because they are addicted and reliant on China. Powell is probably rescuing the world financial institutions from Chinese corruption.

If it is true, then China is far more powerful than we thought.

Think Venezuela or Weimar on a global scale.

Venezuela was overwhelming dependent on a single export, oil, whose prices collapsed. How is that like Japan? Weimar was forced to repay its debts in gold and foreign currency. How is that like Japan?

My theory for such massive QEs under Trump era, agreed by both DEM and GOP,

Your theory is wrong, since QE and other monetary policy are decided by the Fed and not the politicians.

I'm earn mostly yen, for which I thank my lucky stars.

Your theory is wrong, since QE and other monetary policy are decided by the Fed and not the politicians.

Formally not, but informally yes.

If the FED was truly independent, then the Nixon Shock in 1971 should not happen. Richard Nixon pressured the Governor at the time to do massive QE, so he could have an economy that looks good.

Powell is also a Republican, so one way to another he likely has a partisan preference. Just look at the Supreme Court, the institution that supposed to be a neutral entity, free from any politics. Yet, they have been overwhelmingly political in the 200 years. From slavery to Bush presidency, Supreme Court has done nothing apolitical and Constitutionally valid.

If the FED was truly independent, then the Nixon Shock in 1971 should not happen. Richard Nixon pressured the Governor at the time to do massive QE, so he could have an economy that looks good.

No. You emphatically do not know your economic history. I lived that era and remember it well. Number one, QE is a polite term for adding money to the money supply when wages and prices are tending to fall, meaning DE-flation. That is what much of the world faces to day. In 2008-2009 the largest measure of the US money supply, M3, declined by something between $16-20 trillion. The much maligned bank bailout and the other measures taken at the time arrested the free fall in the money supply but deflationary pressures persisted, and persist to a lesser extent to this day. Since Congress was unwilling to engage in direct fiscal stimulus the Fed came up with the idea of QE. Notice they never openly talked about deflation, as they feared the widespread expectation of deflation could overwhelm any policy or monetary remedy available to them.

Richard Nixon by contrast faced massive IN-flation. Double digit inflation, combined with stagnant economic growth. It was nothing at all like today's situation and the Fed back then emphatically did not engage in QE by any stretch of the imagination. In stead the US enforced wage and price controls (remember those or were you even born yet?), surchargegs on imports and the US ended the direct convertibility of US dollars for gold. No QE. Please learn some economics, and economic history before posting stuff that is historically incorrect.

The US forced all of its allies paying the overdue money from the years of Marshal Plan.

Again, that is not what happened. Not even close. Dude, where do you come up with this stuff?

What really happened was a number of European nations threatened to redeem their entire holdings of US dollars in gold. As the French put it, it costs the US only a few cents to print a $100 note but foreign nations must produce $100 in goods in order to obtain one. As the US ran a budget deficit (nothing like today but still) the value of the US dollar was falling relative to the currencies of its trading partners in Europe and Japan. As their currencies rose in value relative to the Dollar, their exports fell and this cut into their prosperity. A number of European nations led in particular by France were threatening to redeem their entire holdings of US Dollars in gold at the going exchange rate. There wasn't enough gold in the whole US Fed to support this so Nixon ordered the gold window permanently closed. Outrage might be too polite a word for the response from Europe and Japan over this move. It immediately created massive chaos in global foreign currency markets. The US at the same time instituted a 90 day wage and price freeze and a surcharge on imports.

No. You emphatically do not know your economic history. I lived that era and remember it well. Number one, QE is a polite term for adding money to the money supply when wages and prices are tending to fall, meaning DE-flation. That is what much of the world faces to day. In 2008-2009 the largest measure of the US money supply, M3, declined by something between $16-20 trillion. The much maligned bank bailout and the other measures taken at the time arrested the free fall in the money supply but deflationary pressures persisted, and persist to a lesser extent to this day. Since Congress was unwilling to engage in direct fiscal stimulus the Fed came up with the idea of QE. Notice they never openly talked about deflation, as they feared the widespread expectation of deflation could overwhelm any policy or monetary remedy available to them.

Christ, your memory is really dripping if you really lived that era.

https://www.bbc.com/news/business-42302771

https://sports.yahoo.com/ugly-economic-lesson-nixon-era-145925066.html

Nixon era is the prime example, used by Central Bankers, not to disallow Central Bank independence.

Here is how negative interest rates work and why.

Number one, banks are required to hold a certain percentage of their outstanding loan balance in hard cash on deposit at the reserve bank of whatever nation one is examining. What that means is that if Bank X in the US wants to loan $100 to a business or individual, it has to have $4 on deposit at the regional Federal Reserve bank for its region.  If at the end of the day the bank does its books and only has $3 on hand at the Fed to cover that loan because the wrote more loans than they had reserves to cover, then they have to borrow a buck from the Fed at an interest rate called the Discount Rate.  The remaining $96 cents of that $100 loan is money out of thin air. This is how the money supply grows. It's not usually the Treasury printing money, it's bank loans. The Fed will raise and lower the discount rate to make borrowing more or less expensive in response to broad economic conditions. Too much credit, the money supply expands faster than output and you have increasing inflation. Too little credit, the money supply expands too slowly and you choke economic growth, maybe even create conditions for deflation.

But it isn't desirable for banks to just sit on money either. For an economy to grow money has to flow and loans have to be made to finance business expansion. To coax banks to lend more during a period of both low growth and low inflation, or maybe to stave off deflation as is the case today, a reserve bank may chose to charge banks interest to hold cash on deposit at the reserve bank above that necessary to meet their reserve requirement. It is a way to tell banks to lend instead of sitting on cash.

Christ, your memory is really dripping if you really lived that era.

Did you even read the article you posted? Apparently not. Burns cut interest rates. That is not what Quantitative Easing is. Not even close. Burns interest rate cut was not the "Nixon Shock" either. That came later in part as a result of the earlier interest rate cut. The "Shock" was the combination of closing the gold window, freezing wages and prices and adding a surcharge to imports. Nothing at all to do with QE. The nation was faced with massive inflation, not the deflation we have today that has driven the use of QE.

Quantitative Easing means adding money directly to the money supply by buying US Treasury notes. Sellers get cash in exchange for the bonds they sell to the Fed and that cash increases the money supply.

QE is done to thwart an incipent or actual decline in the money supply. It is done to ward off deflation, meaning falling wages and prices. Why is that important? Falling wages and prices probably sounds good to some. Here is the rub. Outstanding loan balances do not decline with wages and prices. As personal and business incomes fall as a result of deflation, there comes a point where households and business can no longer make their debt payments. When that happens on a large enough scale you have widespread bankruptcy, mass unemployment and human misery rivaled only by war. In addition, to make things even worse, during a deflation those who hold cash tend to put off purchases as they know if they defer that purchase the price will only go lower. This accelerates the economic destruction as sales fall off even further than would be the case from unemployment alone. Economists and central bankers don't really know where the bottom is in a fully developed deflationary spiral so they do things like QE, buying up bonds to add cash to the economy calculating the added cash in the money supply will stave off deflation before it can become established.

Oooh, three thumbs down for telling the truth. Tough crowd here!

Interesting exchange above. The person citing irrefutable facts is consistently downvoted, the person dreaming up fantasies is heavily upvoted. I guess that's the world we're living in.

Interesting exchange above. The person citing irrefutable facts is consistently downvoted, the person dreaming up fantasies is heavily upvoted. I guess that's the world we're living in.

Sigh, Economics is the Rodney Dangerfield of the social sciences.