Currency markets are breaking:
Currency markets are breaking.
The Bank of Japan has kept yield curve control at 0.25%.
This means that the BoJ has unlimited buying power in buying Japanese bonds.
This increases inflation in the country and makes everything in the local currency more expensive.
It imports inflation from the US into the country.
The BoJ is one thing, but now the Chinese RMB is breaking.
Look at this.
The Chinese RMB breaking the 7 mark is disastrous.
China has been known to keep it’s currency artificially low to prop up its exports so it makes it cheaper for other countries to buy the goods they produce.
With the Chinese RMB going higher, it causes massive local inflation.
Add that to the popping of the biggest mortgage bubble in history, their zero Covid policy and a falling market and you have a powder keg on your hand.
When currency markets blow, all hell breaks loose.
The Fed seems set on breaking inflation domestically, no matter how much pain they have to handle.
Let’s see.
Let’s see how quickly other currencies break before the Fed resorts to QE and massive stimulus again to save the existing systems.
Long Term Capital Management in ‘98 broke up because of the Asian currency crisis that started in Thailand as many countries were forced into devaluing their currency bringing on a massive financial crisis.
That could be coming along with the bursting of the everything bubble.
China could devalue its currency once again, only this time they’re dealing with many other issues.
And we haven’t even talked about Europe.
The Euro is finished.
There are too many countries with different cultures, ways of spending and debts that can’t all be financed by Germany and France.
It’s trading less than par with the US dollar, something that hasn’t happened in decades.
It imports inflation into Europe while making American travelers happy to visit.
Never thought in my life I’d be paying attention to currencies, yet here we are.
It’s scary.
Currency crises are breaking.
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