Business

"Intervention in foreign exchange markets in order to gain a competitive advantage is unacceptable," proclaims US Treasury Secretary Jack Lew in a strongly worded statement today with regard America's position in the global economy. That we note this comment is only relevant as, despite the apparent "stability" of the Chinese Yuan against the USD, relative to the 13-currency-basket with which China primarily trades, the Yuan has collapsed to 17-month lows - with JPY and EUR appearing to bear the brunt of the pain.

When we first warned that something was breaking in the American auto market, the Phil-LeBeau-ians crawled out of the woodwork to explain how everything is still awesome (brushing the weakness in stocks) despite soaring inventories and shrinking credit. Then when used-car prices began to leak lower, a few paid attention and the recent weakness in new car sales has shocked most. Now, however, used-car-prices are plunging at a similar pace to 2008...

With every passing day, the Fed is slowly but surely losing the game.

Only it is not just former (and in some cases current) Fed presidents admitting central banks are increasingly powerless to boost the global economy, even if they still have sway over capital markets. What is far more insidious to the Fed's waning credibility is when former economists affiliated with the Fed start repeating mantras that until recently were only a prominent feature in the so-called fringe media.

Back in October 2014, just after the BOJ drastically expanded its QE operation, we warned that the biggest risk facing the BOJ (and the ECB, and the Fed, and all other central banks actively soaking up securities from the open market) was a lack of monetizable supply. We cited Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo, who said that at the scale of its current debt monetization, the BOJ could end up owning half of the JGB market by as early as in 2018.

Having correctly predicting the yen’s advance beyond 115 and then 110 per dollar, former Japanese Finance Minister Eisuke Sakakibara now says Japan’s currency may strengthen to 100 by year-end.

As Bloomberg reports, having been in charge of currency intervention in Japan, Sakakibura was dubbed Mr. Yen for his ability to influence the exchange rate in the 1990s, seems to suggest - uinlike Suga overnight - that intervention is unlikely (or unlikley to be successful).