Japan threatens huge dollar sell-off

[clem_c_rock]

http://observer.guardian.co.uk/business/story/0,6903,1366578,00.html


Japan is warning the White House that there will be 'enormous capital flight' from the dollar if the Bush administration maintains its laissez-faire approach to the mounting currency crisis.

Tokyo fears that Japan's strongest economic recovery in a decade could be derailed by the sudden appreciation in the yen against the greenback.

The criticism of President Bush's inaction, by a senior member of the ruling Liberal Democratic Party, will be taken as a veiled threat that Japan could start to sell off its multi-billion-dollar holdings of US Treasuries. 'The Japanese government is going to ask for a strong dollar policy; if it continues to fall, there would be enormous capital flight from the dollar,' said Kaoru Yosano, chairman of the LDP's policy council, adding that Japan would be calling on its fellow G7 governments to demand the US deal with the massive fiscal deficit that has helped to prompt the dollar's decline.

[rockymountaindem]

1. Oh boy...

the good news just keeps piling up.

[Stuckinthebush]

2. Why does Bush love the weak dollar?

Is it because of a short sighted belief that the weak dollar will help out his buddies who need it for export purposes?

I'm sure it will help out his buddies in the short term, but eventually it will catch up to them as materials become more expensive and domestic markets become depressed.

[indepat]

8. Look at the bright side: the humongous Federal debt and obligations

could more readily be paid with dollars worth only a very minor fraction of its previous value. Of course, like the Germans after WWI, we might have to wheelbarrow our dollars to the store for a loaf of bread. But this is but such a small price to pay to be made safe and have a man of God leading our nation.

[bemildred]

3. Eh, I guess I'll hang on to those Japanese mutual funds a bit longer.

A bet is a bet.

[PATRICK]

4. More smart professional people

that could have seen this coming years ago and can do little but bluster.
All Bush has to do is dare and throw his weight around in the boat. Everyone else grips the sides and tries to keep it steady.

In a sane, smart world someone would have thrown the twerp overboard. Why is everyone so disbelieving, nice and stupid? because they put themselves into the box and considered themselves superior to both change and reality.

I love the pessimist economist who years ago predicted this COULDN'T happen to stave off the American day of reckoning beacause it would have to shift damage either to Europe or the East. Well, duh, do you think Bush considers that bad?

The neocons have really stumbled onto a planet full of topdown sheep.

[illflem]

5. Bush thinks the rest of the world will do what Reagan did

when the US dollar was stronger than the rest of the world's and devalue their currencies to match ours.

[clem_c_rock]

6. Couldn't have said it better myself

And, if the big GW base is what they say it is (working class Christian folks), they will be some of the first to go homeless.

[ztn]

7. well covered topic except in mainstream media.

this article is from the american prospect last month:

Marketplace, November 24, 2004
>The holiday buying season is upon us. You might as well spend your cash now because the dollar is dropping like a stone in international currency markets. It's dropped nearly 30 percent since 2001, and is now at a record low. Even without the recent dour pronouncements of Alan Greenspan and Treasury Secretary John Snow, the greenback is likely to fall further. And the reason is simple: We're living beyond our means. American consumers are deep in debt. The nation is importing more than we're exporting. Most importantly, the federal budget deficit is out of control.
>
>Nearly all of the increase in public debt over the last four years -- some 1 trillion dollars -- has been financed by foreigners, lending us the money. But who wants to lend more and more to a drunken sailor? Foreigners are bailing out of dollars. Even the Chinese and Japanese, who have kept lending so we'll keep buying their exports, are starting to wise up.
>
>American exporters are cheering because a lower dollar makes everything they sell abroad cheaper. But it's bad for the rest of us because as the dollar drops everything we buy from abroad -- including oil -- becomes that much more expensive. And these higher prices will ripple through the economy, threatening inflation and higher interest rates -- and, ultimately, reducing our living standards.
>
>It's one of the oldest of economic laws: When you're living too high on hog, eventually you're gonna fall off and find yourself in pig slop. Riding highest on the hog right now is the federal government, with a budget deficit of over $400 billion this year. Surprise, surprise! It turns out that cutting taxes while waging an expensive war and doling out corporate welfare leads to red ink. If I were cynical, I'd suspect the White House had an ideological agenda to starve the government so it can't do much of anything in the future except wage war. But whatever the motivation, the deficits are driving the dollar down and subjecting America to huge economic risks. The sensible move would be to roll back the Bush tax cuts, but don't hold your breath.
>
>In the meantime, enjoy the holiday buying season, folks. And here's a buying tip: With the dollar dropping, the nicest and safest gift you can give a friend or loved one is ... gold. But you better move fast. As the dollar drops, the price of gold is soaring.