Will the United State’s Economy Turn out Like Japan’s #japan #shorts #japaneseyen #usa #economy
Gary Brode of Deep Knowledge Investing and Robb Fahrion of Flying V Group discuss the 5 Things to Know in Investing This Week: The Let Them Eat Cake Issue
-The yen breaks through the 160 mark. Currency interventions are ineffective, but the BoJ still keeps too-low rates.
DKI Summary:
The Bank of Japan’s (BoJ) economic stimulus and loose monetary policies over the past decade have significantly weakened the yen. In 2013, the Japanese government aimed to accelerate the economy with billions in economic stimulus and almost a decade of negative interest rates. That, combined with rate hikes from the US Federal Reserve, led to a crash in the yen, now down about 60% vs the dollar in under four years.
DKI Takeaway:
The BoJ has tried multi-billion-dollar interventions to prop up the yen. These efforts are effective, but only for 1-2 days. Following that, the yen slides back to its previous low levels against the dollar. That’s because temporary market interventions do nothing to address the underlying problem. If the BoJ wants to support the yen, it will need to raise interest rates. Given Japan’s massive debt which exceeds 260% of GDP, any rate increases will blow out their budget and cause more yen printing to pay the higher interest expense. That leads to more inflation. They are stuck. For readers who support modern monetary theory (MMT) and endless spending in Washington DC, please view this example as a warning.
Your links:
This week’s written version of the 5 Things with graphs:
https://deepknowledgeinvesting.com/weekly-points-june-30th-2024/
Deep Knowledge Investing Subscription Page: https://deepknowledgeinvesting.com/we…
Flying V Group: https://www.flyingvgroup.com/
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