So what do yall think the new currency is going to be?

[SonicG]

I live in Japan but have no brain for economics. But here are some perspectives FWIW.

Here's the historic exchange rate since 1971 (Click on "All Years")
https://www.macrotrends.net/2550/dollar ... ical-chart
Until recently, it hadn't gone over 150 since 1990.

Martinez
@Macro_Core_View
Disclaimer: I have no knowledge in Economy

Nikkei 225 vs USDJPY historical chart

Generally USD down, stock market went up. until the Asian stock crashed in 1989 by Soros.

Beyond that lower Japanese yen favours more on Nikkei 225.

i reckon USDJPY = 1:200 is not impossible

Weak yen stokes Japanese concern over strong rise in import prices
April 30, 2024 15:00 JST
TOKYO -- The yen surged to 154 to the U.S. dollar on Monday after falling past the 160 mark, triggering speculation the Japanese government and central bank had intervened in the market to support the nation's currency.

Although authorities have not disclosed whether they stepped in, the government has started expressing concern that the weaker yen has been driving up import costs in the East Asian country.

The limp yen has also been dragging on efforts to push up real wages as Japan looks to eliminate the deflationary mindset that has long overshadowed its economy.

Masato Kanda, Japan's vice finance minister for international affairs, described recent activity in foreign exchange markets as "speculative, rapid and abnormal," but declined to comment when asked about intervention. He said that excessive currency movements negatively impact people's daily lives.

"Higher prices of imported goods are said to be affecting the most vulnerable people and could also drag on Japan's momentum in raising actual wages," the top currency diplomat said. Changes in real wages can be calculated by subtracting consumer price rises from wage increases.

Inflation will accelerate if import prices climb due to the weak yen. Real wage increases were negative for 23 consecutive months through February, with yen weakness further pushing back when real wage increases turn positive.

Wage hikes are currently in full swing, as the government places turning the real wage increase positive through wage hikes as one of its utmost urgent issues.

According to Rengo, the county's largest group of unions, the average base salary that raises corporate fixed labor costs and affects bonuses, retirement pay and pension payouts, would go up at 3.57% through Japan's shunto labor negotiations, 1.46 percentage points higher than the same period the year before.

The wage hike trend is spreading to small and medium-sized companies.

Yet, if the rate of inflation continues to exceed the rate of wage increases, real wages will not turn positive. Japan's consumer price index excluding imputed rent of an owner-occupied house is expected to rise by 3% year-on-year in the three months starting October 2024, according to Meiji Yasuda Research Institute.

If the yen falls to 170, Meiji Yasuda estimates it would push up the CPI by 0.4 points. The research institute sees wages going up less than 3.4%. Thus, the yen's fall to 170 would leave real wage growth negative. The yen at 160 would barely make real wage growth positive either.

A survey of economists released in April by the Japan Center of Economic Research showed that real wages are most likely to turn positive in the three months between July and September.
https://asia.nikkei.com/Economy/Inflati ... ort-prices

Just more of the war on the poor and hollowing out of the middle class...

Yen's surge raises questions over intervention: 3 things to know
Japanese currency rebounds by around 5 to dollar after touching new 34-year low

TOKYO -- The yen's sharp appreciation Monday after crossing the 160 mark against the dollar has triggered speculation that Japanese authorities intervened in the market to shore up their home currency.
The yen has weakened in recent months, fueling concerns over the potential impact on import prices and inflation. But the Japanese currency strengthened to around 155 to the dollar Monday afternoon after reaching a fresh 34-year low earlier that day. It has since been trading around 156.
Here are three things to know about how currency interventions work.
What is a currency intervention?
Japan engages in two main types of interventions: selling dollars for yen to correct excessive yen weakness, or selling yen for dollars to correct excessive yen strength.
The decision to conduct an intervention legally rests with the finance minister, but the vice minister of finance for international affairs often makes the actual call.
The BOJ then carries out the intervention on the finance minister's behalf. In a yen-buying intervention, the bank sells dollars from the Ministry of Finance's Foreign Exchange Fund Special Account to private-sector banks and buys the Japanese currency.
Japan imports a large portion of its food and natural resources. A weak yen makes imports pricier, which can accelerate inflation. Rapid fluctuations in exchange rates can also cause problems for businesses. Yen-buying can help in such cases.
Interventions can also happen outside trading hours or on holidays in Japan, either by the BOJ trading in overseas markets or acting through such overseas intermediaries as the Federal Reserve Bank of New York or the European Central Bank. Requests for such assistance are said to rarely be denied, if ever.

What are some examples of currency interventions by Japan?
Japan intervened a total of three times in September and October of 2022, spending roughly 9.2 trillion yen ($58.7 billion at current rates).
The Finance Ministry tries to time the interventions to maximize their effect. The September intervention happened after then-BOJ Gov. Haruhiko Kuroda held a news conference on the latest monetary policy meeting. The October interventions were carried out early in the morning or late at night, when the market was not being watched as closely.
Japan is believed to have conducted the 2022 interventions unilaterally, tapping only its own foreign reserves.
But currency authorities can also carry out coordinated interventions with overseas counterparts. This lets them pool resources to have a greater impact on the market.
In June 1998, Japan and the U.S. conducted a coordinated yen-buying intervention. The 1985 Plaza Accord was a coordinated effort by the U.S., Japan, the U.K., West Germany and France to curb excessive strengthening by the greenback.
The Group of Seven also bought euros in 2000 and sold yen in 2011.

Are interventions always announced immediately?
Masato Kanda, vice minister of finance for international affairs, told reporters of the September 2022 intervention right after it happened. The announcement led the yen to strengthen by more than 5 against the dollar at one point, to the 140 range.
But he did not immediately announce an intervention that October, declining to comment on the matter at the time.
Such "stealth interventions" make it harder for market watchers to determine why exchange rates are shifting, which can dissuade speculative trades and extend the effects of the intervention.
These interventions are not kept from the public forever. The Finance Ministry releases the total amount of foreign exchange interventions conducted each month at the end of the month. Breakdowns by date are released quarterly.
https://archive.md/MvuuY#selection-3223.0-3239.227

I have become interested in the Plaza Accords recently as being a reason why the Japanese bubble economy collapsed, not simple "overvalued real estate market".

Also, fwiw, while Japan was the wealthiest country for quite a while, it's dependency on food imports has steadily increased to a precarious level:

Surely you have heard about free houses in the Japanese countryside...
The Rural Population of Japan, in millions and ratio to the total population (Reprinted from Japan National Institute of Population and Social Security Research, 2017)

[Elihu]

https://www.zerohedge.com/markets/canno ... mple-terms

aww jeepers, no sense in lining out 97% of that silly article, but:

And then he lays out the case bare: "We can walk through the numbers, but the bottom line is that the US government and the Treasury have entered a debt spiral. We now have $34.7 trillion of debt, which is over 120% of GDP. If you're a country with debt over 120% of GDP, your fiat currency fails. This is where we're at, and we're just spending and spending and spending.”

“What happens if you get into a recession? Your tax revenues drop precipitously, and your spending rises at a similar rate because of all your social programs like unemployment and wage security.You could wind up having a deficit that's not $2 trillion but could be $3, $4, $5, or even $6 trillion if it gets bad enough. Just imagine that. Suddenly, we are adding over 10% to our debt in a year, maybe 20% in a year. That is the debt spiral.”

He continues: “We can't do that because the rest of the world will turn around and look at our bonds and say, 'Why would I buy those bonds if they have to keep issuing new bonds to pay me for my bond?'We are in a situation where we have to continually issue more and more debt. This is rising exponentially, and there really is no way out. That's the problem.”

“Modern monetary theory proponents think it's just driving the economy; there's no big deal. However, when the music stops and people stop having confidence in the U.S. Treasury, that feeds into the US dollar. That's when you get into a problem. Why does that happen? It happens because of inflation.It all goes back to this central problem: this constant and relentless manipulation of the monetary system through central banks that create inflation.”
“That is a soft default on that debt every single day because the dollars you're getting paid back in the future are worth less than when you lent them out to the government initially. So, who wants to lend the U.S. Treasury dollars for 30 years when they know that inflation only has to go up to continue the charade?"
"They get into what's called a debt spiral. They can't get out of it. And this is where we are. So what is the option for the U.S. government if they continue to borrow? What does that mean? Well, that means that they must have inflation. There absolutely is no way around it. That inflation allows GDP to grow nominally. Remember that $28.5 trillion number? That has to go up. Nominally meaning just in terms of dollars, not inflation-adjusted.”

“When you have more dollars in the system, it creates more GDP because there's more dollars. And so that GDP number goes up. The productivity number goes up. But it's fake. It's not more stuff. It's just stuff that's more expensive. So there are more dollars in the system. And when you go to pay down that debt in the future, you're paying it down with dollars that are cheaper, that are worth less. This is called the debasement of the U.S. dollar. The U.S. dollar gets worth less and less and less every single year.”

He concludes: “And so this is the challenge. The U.S. government absolutely must have negative real rates. What do I mean by that? That means they must have coupons on their treasuries that are lower than the inflation rate, and they have to have this in perpetuity. That's the only way they can keep this charade going. It won't go on forever. Make no mistake, this cannot go on forever."

but i dunno. i think i will personally be surprised at the absurdity level and extent to which this contraption can and will be parlayed and leveraged out even from here! Perhaps another 10-15 years. after all one empirically expects an out of control machine to continue accelerating as it approaches it's hyper velocity and consequent detonation. unless the plug is pulled. and things can only get worse along the way. More riches, more poverty, more war, more confusion, more anger, etc etc etc. really bad. imo

[Elvis]

The flat assertion here is just wrong.

If you're a country with debt over 120% of GDP, your fiat currency fails.

And what does this even mean? — "and we're just spending and spending and spending.” It means nothing. Governments spend.

He never says why it's a problem, except for the assertion that it's a problem.

He keeps saying "we" have this debt, but it's the government's debt. "We" own the corresponding assets. Counterparties.

I agree that the problem—purely a policy choice—is interest rate hikes. I dunno about permanent negative rates, though.

These Zerohedge guys think in terms of fixed exchange rates and long discredited monetarist notions (issuing money causes prices to rise, etc.).

Inflation is a market failure.

https://www.zerohedge.com/markets/cannot-go-forever-explaining-us-debt-crisis-simple-terms

aww jeepers, no sense in lining out 97% of that silly article, but:

And then he lays out the case bare: "We can walk through the numbers, but the bottom line is that the US government and the Treasury have entered a debt spiral. We now have $34.7 trillion of debt, which is over 120% of GDP. If you're a country with debt over 120% of GDP, your fiat currency fails. This is where we're at, and we're just spending and spending and spending.”

“What happens if you get into a recession? Your tax revenues drop precipitously, and your spending rises at a similar rate because of all your social programs like unemployment and wage security.You could wind up having a deficit that's not $2 trillion but could be $3, $4, $5, or even $6 trillion if it gets bad enough. Just imagine that. Suddenly, we are adding over 10% to our debt in a year, maybe 20% in a year. That is the debt spiral.”

He continues: “We can't do that because the rest of the world will turn around and look at our bonds and say, 'Why would I buy those bonds if they have to keep issuing new bonds to pay me for my bond?'We are in a situation where we have to continually issue more and more debt. This is rising exponentially, and there really is no way out. That's the problem.”

“Modern monetary theory proponents think it's just driving the economy; there's no big deal. However, when the music stops and people stop having confidence in the U.S. Treasury, that feeds into the US dollar. That's when you get into a problem. Why does that happen? It happens because of inflation.It all goes back to this central problem: this constant and relentless manipulation of the monetary system through central banks that create inflation.”
“That is a soft default on that debt every single day because the dollars you're getting paid back in the future are worth less than when you lent them out to the government initially. So, who wants to lend the U.S. Treasury dollars for 30 years when they know that inflation only has to go up to continue the charade?"
"They get into what's called a debt spiral. They can't get out of it. And this is where we are. So what is the option for the U.S. government if they continue to borrow? What does that mean? Well, that means that they must have inflation. There absolutely is no way around it. That inflation allows GDP to grow nominally. Remember that $28.5 trillion number? That has to go up. Nominally meaning just in terms of dollars, not inflation-adjusted.”

“When you have more dollars in the system, it creates more GDP because there's more dollars. And so that GDP number goes up. The productivity number goes up. But it's fake. It's not more stuff. It's just stuff that's more expensive. So there are more dollars in the system. And when you go to pay down that debt in the future, you're paying it down with dollars that are cheaper, that are worth less. This is called the debasement of the U.S. dollar. The U.S. dollar gets worth less and less and less every single year.”

He concludes: “And so this is the challenge. The U.S. government absolutely must have negative real rates. What do I mean by that? That means they must have coupons on their treasuries that are lower than the inflation rate, and they have to have this in perpetuity. That's the only way they can keep this charade going. It won't go on forever. Make no mistake, this cannot go on forever."

but i dunno. i think i will personally be surprised at the absurdity level and extent to which this contraption can and will be parlayed and leveraged out even from here! Perhaps another 10-15 years. after all one empirically expects an out of control machine to continue accelerating as it approaches it's hyper velocity and consequent detonation. unless the plug is pulled. and things can only get worse along the way. More riches, more poverty, more war, more confusion, more anger, etc etc etc. really bad. imo

[Elihu]

The flat assertion here is just wrong.

Elihu wrote:
If you're a country with debt over 120% of GDP, your fiat currency fails.


And what does this even mean? — "and we're just spending and spending and spending.” It means nothing.

man that is quirky you zoomed in on those two tidbits. I agree completely, they mean nothing! I stepped away from that post a tiny bit galled at those two nothingburgers, but I reluctantly left them in for dramatic filler, you know leave a little article flavor

Short of a publicity stunt or a catastrophe of some kind which will change and accomodate the new normal, I think there's just going to be an announcemet. It will go something like: Americans do not adjust your television sets. Your government has defaulted on its loans and is bankrupt. Your leaders have absconded. Your country has been foreclosed upon and will be administered by the _________________________________ whoever. remain in your homes your debit cards will continue to work, etc, etc, etc.

At least we can now approximately see this monetary event horizon approaching. Like it's really gonna happen.

[Elvis]

Your government has defaulted on its loans and is bankrupt.

I just don't see the point. Why would the govt default on its obligations? (They're not really 'loans', it's interest rate management.)

Debit cards only work if the banking & payments system is functioning, and under this scenario, all that would have collapsed. Why would leaders abscond with worthless money? In what form?

[Elihu]

I just don't see the point. Why would the govt default on its obligations? (They're not really 'loans', it's interest rate management.)

back to the OP, this has been a tough concept to put across. One morning, in the not too distant future, the bankers are going to log in to the zoom meeting to begin the daily t-bill auction. however, they won't be able to sell any bills because the crowd standing in line to present their matured bills for redemption will be too large for any buyers to get in edgewise. since new issuance is the only source of cash to pay matured bills, well, the whole western monetary system grinds to a halt. Involuntarily. Nobody's in control of this direction or this outcome. Hence I mentioned publicity stunts and catastrophes.

Debit cards only work if the banking & payments system is functioning, and under this scenario, all that would have collapsed. Why would leaders abscond with worthless money? In what form?

the second part of the question first, the absconding is a process that's been ongoing. when the system stops you won't be able to find any american leaders. they'll all be gone. irrelevant. the tv won't even show them anymore. the last of the national patronage will be gone. bankrupt. leveraged to the hilt.

and again back to the OP, whoever has bought and paid for and owns our "leaders", they know about this, that's why they're planning the techno grid prison, with digital currency and 24/7permission to exist.

[Elvis]

One morning, in the not too distant future, the bankers are going to log in to the zoom meeting to begin the daily t-bill auction. however, they won't be able to sell any bills because the crowd standing in line to present their matured bills for redemption will be too large for any buyers to get in edgewise.

When a Treasury security reaches maturity, a computer at the Fed autmotically shifts the dollars in the securities account to a reserve account. The bond (or T-bill) holder doesn't have to do anything.

Treasury auctions are set up not to fail; the Fed (one way of another) provides the reserves to the Primary Dealers (around 25 large banks & brokerages) to pay for the bonds.

This system has been running smoothly for a long time—never a payment missed—and there's really is no "day of reckoning" when it comes screeching to a halt because...no more money? They'll run out of money when they run out of keystrokes.

This is one of the better "explainers" of how Treasury auctions work:

How the US Government Actually Creates Money | Interview with Warren Mosler

https://www.youtube.com/watch?v=480sGei5ZsA

the absconding is a process that's been ongoing. when the system stops you won't be able to find any american leaders.

But if they abscond with the money and "the system stops," the money will be worthless. So I don't get this part, either.

I think your fears apply to private debt, which grows a) when the govt deficit is too small, and b) when the finance sector engages in risky behavior. The finacial system is inherently unstable; government is the stabilizer.

Again, Zerohedge analysis is based around fixed exchange rate thinking, which simly doesn't apply to a floating echange rate regime.


Money systems from the start have ultimately been a coercive means of control—control over resources needed for public purpose ("public" in broad definition here). CBDC design will determine whether it gives more freedom or less freedom to the users. I think CBDCs are a 'natural' development in the evolution of money; I say let's make the best of it.

[Elihu]

This system has been running smoothly for a long time—never a payment missed—and there's really is no "day of reckoning" when it comes screeching to a halt because...no more money? They'll run out of money when they run out of keystrokes.

how much computing power is there? it is up against a number that is doubling faster and faster and accruing interest. that's going to take more computing power continuously forever. the transactions will continue increasing in quantity and speed until they are continuous as fast as any computer can process then faster. as i understand the situation. but, se la vie. in one sense you are right. the whole thing could be canceled and restructured with the proper publicity, so sorry about coming on like this is the only worry in the world this too shall pass

[DrEvil]

I think you vastly underestimate the hardware the banks currently have, and the hardware they can get their hands on if needed. Computing power is never going to be an issue.

[Elihu]

https://www.zerohedge.com/markets/us-sp ... x-revenues

US Spent A Record $140 Billion On Debt Interest In June, 30% Of All Tax Revenues

And it only goes downhill from there, because as we have noted previously, the biggest risk factor is not so much spending on such discretionary items as social security, health and national defense..., but on interest, and here recall what we said back in April: "interest on US debt - currently the second biggest government outlay at $1.1 trillion - will surpass social security and become the single biggest US expense before the end of 2024 at $1.6 trillion."..... and hit $1.7 trillion by April 2025, at which point it will be by far the single biggest outlay of the US government.....

and according to mmt, these interest payments mean nothing. they're not real money that could otherwise be spent on social security, defense or whatever, it's just bookkeeping entries. chuckle. However if all outlays can be viewed as slices in a pie graph, the interest slice is going to reduce the size of the other slices until they reach zero.

just nibbling popcorn as reality grinds one delusion after another.

[Elvis]

Debt Interest In June, 30% Of All Tax Revenues

Except none of it is paid with taxes. Saying it's "30% of all tax revenues" is pretty meaningless.

Zerohedge fail.

according to mmt, these interest payments mean nothing.

No. According to MMT, these interest payments mean $1 trillion a year of free, no-strings-attached money paid to wealthy bondholders, in proportion to how much money they have.

Do you think that's a wise policy? (I don't.) Do you think some of those free dollars might filter into the real economy and contribute to inflation? (I do.)

they're not real money that could otherwise be spent on social security, defense or whatever

Of course it's real money!—paid to people & banks who already have money, in proportion to how much they have. Your comment posits a fixed pool of money available for either Treasury bonds, or social programs—but not both!

This "crowding out" supposition is mistaken; the limit is real resources, not dollars. That is, the social programs etc. are a matter of political will—not any scarcity of dollars. The govt can just as easily pay for social programs, military, etc. as it pays the interest on Treasuries—with keystrokes.

This is the delusion:

if all outlays can be viewed as slices in a pie graph, the interest slice is going to reduce the size of the other slices until they reach zero

That's not how the pie works. The world does not operate on fixed exchange rates.

[Elvis]

There is no good reason to use the term 'debt' when referring to outstanding Treasury securities. The expression 'national debt' is really 100 years out of date for America, and does not reflect the modern U.S. financial system.

—Frank N. Newman, former Deputy Secretary of the Treasury


Frank Newman: Six Deficit Myths that Hold Back America

https://www.youtube.com/watch?v=npt_SPrvS-c

[Elihu]

No. According to MMT, these interest payments mean $1 trillion a year of free, no-strings-attached money paid to wealthy bondholders, in proportion to how much money they have.
Of course it's real money!—paid to people & banks who already have money, in proportion to how much they have. Your comment posits a fixed pool of money available for either Treasury bonds, or social programs—but not both!

Aha! so it is real money paid out by our "gov" to bondholders, more than SS, defense and anything else. and getting bigger fast.

btw, the angle rarely looked at is the bondholders. at 140 billion in a month, if you had one hundred bondholders, each one would be receiving over a billion dollars a month in passive investment income! can you imagine? if it were a thousand bondholders each would be receiving a hundred million a month! incredible. who are they? does anyone outside the primary dealers even know?

that's the cause of your rich-poor divide right there. no, i do not think that's wise policy and have said so all along.

we've had a spirited discussion which i thank you for and appreciate though neither of us have been moved from our positions. however, to avoid dogmatism, i must concede that there may be factors outside my understanding which would tank my argument and you, and mmt, mention many. For example:

There is no good reason to use the term 'debt' when referring to outstanding Treasury securities. The expression 'national debt' is really 100 years out of date for America, and does not reflect the modern U.S. financial system.
—Frank N. Newman, former Deputy Secretary of the Treasury

ironically you agree with the great dick cheyney who said "ronald reagan taught us that deficits don't matter". it's possible the insiders know of things the laity do not. to be clear, i don't mean academic concepts that are difficult to understand. i mean the wink and nod amongst themselves type stuff.

poor ronny. i remember his departure speech where he said everything went great except for the deficit. that was just seventeen years after the world went full fiat, back when we thought 500 billion was a lot of money, ha, ha. look at it now. 35 trillion in our country's 235 year history and 98% of that racked up in the last 50ish years since 1971. maybe that's correlation and not causation but i'm skeptical.

[Elvis]

ironically you agree with the great dick cheyney who said "ronald reagan taught us that deficits don't matter"

No—I don't agree with that! Cheney used deficits to expand the military and national security surveillance state, while ignoring domestic needs.


A little backstory:

In the early 1990s, Warren Mosler, a founder of MMT, was introduced to Donald Rumsfeld for help getting Mosler's book published. Meeting in the steam room of the Chicago Racquet Club, Mosler explained the MMT basics to Rumsfeld—who "got it" right away.

Rumsfeld almost certainly ran to tell his BFFL Dick Cheney about it. And thus we get Cheney telling Paul O'Neil, "deficits don't matter."

MMT describes how money systems work; the analysis indicates certain policy approaches, but knowledge of the money system can be used for good or for evil. Ignorance of the money system is encouraged and exploited.

[Belligerent Savant]

https://x.com/KobeissiLetter/status/1820272944292974624