Across the wide Atlantic the U. S. dollar of late has been on its own tear upward against most major currencies. A strong dollar and a weak euro are Milano opera house music to the ears of Draghi and his minions at the ECB.
And the Chinese yuan has undergone a similar rebirth to the upside, regaining about half of what it previously dropped against the greenback. In the Land of the Rising Sun it's a similar story with the yen falling against the U.S. dollar.
From a macro point the strong dollar and yuan will help the EU and Japan to perhaps export their way to economic nirvana. At least that's the theory. And it's a good one as far as theories go. This is a backdoor way around what these bureaucrats hate to face most, painful, much-needed structural changes. But theories are often like the best plans of mice and men.
When Japan's chief cook and bottle washer, Shinzo Abe, captured Japan's big kitchen in late 2012, he set out to scrub the yen. And so far so good, since the currency is down over 20 percent against the dollar in less than two years.
If you're in the asset bubble business, it's a good recipe since the upswing in the Japanese stock market pretty much tracked the down swing in the yen. Some might suggests that's what usually happens when you print a lot of currency.
According to reports we've seen, however, the effect on Japanese exports and its real economy have been less stellar. Now to be sure every situation is a bit different, but in this case not that much. Both Japan and the EU are in a global world of hurt and both are looking to the U.S. which is not that much ahead of them, in the view of some, for help.
Everything has a repercussion. So what's this one?
t. man hatter
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