Trade policy has massive long-term ramifications on the strength of a nation's economy. Often people fail to note the difference between free and fair trade. In many ways, the global economy has become an ill-regulated business model tilted to favor big business and giant conglomerates. We should not lose sight of the fact that while free trade is important, fair trade is far more so and should be the main issue.
Developing a long-term sustainable economic system that is balanced would contribute to both global cohesion and the world economy. The article below is in response to a slew of comments from my recent article titled, "Higher Prices On Import Goods A Fair Cost For Jobs". Today many people supporting past trade agreements mistakenly use low consumer prices as a battle flag around which to rally.
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It seems bad news flowing out of China is about to further undermine Japan's hopes for growth. A matter that might not be garnering enough attention or has been largely discounted is how the economic problems that continue to develop in China will spill over and affect Japan. The Japanese economy is very vulnerable to a negative feedback loop that could have strong ramifications on its economy.
The tight relationship between the two is apparent each time trouble surfaces in China the yen jumps in value as wealth in a stealth move flees China often through business back-channels. This should not be misinterpreted as the yen strengthening, it is just a temporary bump before the wealth moves on to an even safer place. More about this subject in the article below.
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Two interesting articles appeared in Japan Today on June 17th. The first titled, "Japan post y216 trade deficit in May" and the other "BOJ to debate weak yen." A recent automotive reliability study that showed Japanese cars falling in quality when compared to their competition and how they were trumped by Korea.
Both Kia and Hyundia blew them out of the water, even American automobiles are faring much better. The picture of Japan's future is both cloudy and complicated by the combination of its massive still growing national debt, an aging population, and their heavy reliance on exports. More on this subject in the article below.
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Still Japan is haunted by massive debt that will soon bring it to its knee's and the yen has started a fall that is unlikely to stop. A loop is developing that will feed on itself. As the yen falls and people in Japan realize that it is liable to continue, more and more people will want to put their money abroad, at that point the yens fall may become unstoppable.
The financial news flowing from Japan has become so loaded with conflicts of interest and internal deals created to prop up one weak institution with another that it would be called comical it the ramifications were not so serious.
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In light of recent big currency moves the crux of what is before us may hinge on "relevant value" rather than inflation or deflation. It is possible that we have been mislead into arguing and debating the wrong issue and should be focused on how our assets compare in value to those of other people around the world. **In what is often referred to as the "end game" or the time the global economy will be forced into resetting, I believe the situation will focus on issues of currency and debt valuations. These "debt valuations" will include both government and private obligations. If someone is caught holding a worthless currency or is owed money that is washed away or not "properly repaid" they will suffer greatly. This means some people and countries will be big losers as value and wealth shifts to the "flavor of the day" driven by demand or searching for a safe haven. The article below explores the concept of why the value of things you own and control are more important than whether we have inflation or deflation.
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Somewhere between what we are told is happening in the economy and what is occurring on Main Streets across America is the real and true authentic economy. It is ironic that the more the economy slows it only reinforces the idea that the Fed needs to pour even more fuel on the fire. This is exactly what many of us oppose and see as pure insanity.
This debate continues to polarized those who study the economy and play in the dangerous land of investments. Meanwhile the failure of a crash to materialize and bring markets back to reality over the months and years is causing a breaking in the ranks of those expecting "doom" to wash upon us. More on this subject in the article below.
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