Today Japan’s central bank refused to issue “helicopter money” saying it was unconstitutional. They refused to do anything today saying they needed time to study it. The Nikkei stock index fell 3.6% today (it was down 5% at the low of the day) when the news was announced. The Yen went up 3% which is bad for Japan’s exports. The worse their economy gets the stronger their currency becomes since it appears to somehow magically resist inflation, so foreigners want to hold the Yen. The central bank had recently experimented with negative interest rates but they are not producing results. Global central banks are finding that the zero bound problem is a real barrier to further rate cuts. It is
China has been selling $250Billion of U.S. Treasuries, about 12% of what the central bank owns, but this is only 2% of all of our Treasury issues and this will be offset by growing demand for Treasuries in EM countries, including the private sector in China, to own G7 sovereign bonds. China’s sale is roughly the same as three or four months of the volume of Quantitative Easing that recently ended so it is not that much. As the U.S. economy gets better then the federal deficit gets smaller and thus less Treasuries are issued. This can create a recession in EM countries who view Treasuries as a type of global “money”. There have been suggestions by some economists that
Investors enquire about Shiller investment valuations, copper bubbles, hedges against dollar devaluations and crashes. They wonder what happens to real estate if the dollar is devalued?
Investors enquire about asset allocation and black swan investing; will a falling dollar lead to economic collapse; what to invest in case of dollar collapse? They ask: how to protect against dollar devaluation? What happens to my investments if the dollar collapses? I have written “Dollar devaluation investing”.
The public wants to know about investments for a falling dollar, emerging market funds, hedging against a falling dollar, preparing for the crash of the dollar. More evidence continues to build about risks of a disinflationary crash. Jeremy Grantham writes at gmo.com yesterday that while he sees commodities becoming more valuable over the long run there may be, in the near term, a bad commodities crash, as bad as the stock market crash of 2008-2009, especially if China crashes and the weather improves.