Swiss, Japanese Confront US Currency Parasitism

♠ Posted by Emmanuel in ,, at 8/04/2011 12:09:00 AM
With the US economy showing signs of skidding into the gutter and falling from there into the sewer to paraphrase a certain British politician, other countries with widely traded currencies are girding up to protect themselves from American beggar-thy-neighbour ZIRP as QE3 looms over the horizon. Not that US free money policies have done that country any good, but the US remains utterly unapologetic about being what Vladimir Putin rightly calls a parasite on the world economy. Tell it like it is, Vlad! (And Russia has indeed been lightening up on Treasuries to back up this assertion. See that, China? CCP--put your money where your mouth is at like Mother Russia. Don't indulge the wastrels.) Here's the apropos money quote:
They are living beyond their means and shifting a part of the weight of their problems to the world economy...[t]hey are living like parasites off the global economy and their monopoly of the dollar.
Now on to the stories. Being a tiny landlocked country, Switzerland is naturally concerned about its currency bearing the brunt of not only American free money policies but also European weakness given that the continent holds many of its export markets. It's splitting hairs time with the Swiss National Bank having reduced its policy rate target from 0.25% to zero. It's policy rate limbo rock:
The Swiss National Bank announced a shock cut in interest rates and threatened more action to cap a soaring Swiss franc, but the impact was expected to be short-lived given the currency's safe-haven appeal amid mounting concerns about global growth. The SNB said on Wednesday it would cut its target rate to "as close to zero as possible" from an already rock-bottom 0.25 percent, and said it would very significantly increase the supply of francs to the money market over the next few days...

Swiss exporters have called on both the SNB and the government to take action against the currency's steep rise although the bank has also been criticized for the heavy losses it incurred in its post-crisis interventions in 2009 and 2010. Nick Hayek, chief executive of watch maker Swatch, who has been one of the most outspoken about the impact of the strong franc, welcomed the SNB move. "This is wonderful. Speculators should brace themselves," he told Reuters.
And just as I had waited six long years since 2004 for the Japanese to undertake yen intervention measures, we now have two incidences in 2011 in addition to that in 2010. You stand around waiting for the longest time then three zip past you in quick succession. First came fear of massive yen strengthening via repatriation flows after the devastating earthquake earlier this year that prompted coordinated G-7 intervention out of sympathy for Japan. With the yen dropping well below 80 to the dollar and a rout threatening with further negative US data, the BoJ has now stepped in once more. Unlike during the aftermath of the earthquake, however, it is going it alone instead of with other major central banks:
Japan intervened in currency markets on Thursday to curb the yen's gains that officials fear threatened to derail the economy's recovery from a slump triggered by a massive earthquake in March. Finance Minister Yoshihiko Noda said Japan acted on its own and aimed to stem speculative and disorderly currency moves. Noda told a news conference he expected the Bank of Japan to take appropriate action. He declined to comment on the size of the intervention or say what currencies Japan bought...

The action that followed days of official warnings that the currency, largely driven by broad dollar weakness, has passed levels that the export-reliant economy could live with, pushed the yen down to about 78.30 to the dollar from a level of around 77. Some currency traders braced for further dollar declines should U.S. payroll data on Friday heighten concerns about the health of the U.S. economy. That could increase the chance of Japanese government intervention and make it more likely that the Bank of Japan will ease policy at a meeting ending on Friday.
Unless the BoJ can simulate negative interest rates, there isn't really much leeway for Japan to cope with further American parasitism. Ditto for Switzerland as monetary instruments have so clearly run their course. As before, my belief remains that the key to getting a semblance of world economic order is to put America in its rightful place for such parasitic behaviour. Subprime globalization is a festering scab with the US leeching away the lifeblood of the world economy.