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American Capital Agency Corp. Message Board

  • dr.seymour_butz dr.seymour_butz Mar 17, 2011 9:09 PM Flag

    Question Re Repatriation & yen/dollar

    This message board appears to have some of the most knowledgeable investors of the various stock boards. Therefore, I wish to ask a question about economics that I have never fully understood.

    The disaster in Japan has raised a lot of speculation about Japanese repatriation of capital in the U.S. to rebuild the country. The question that is being debated is what effect a sizable repatriation, primarily in bonds and treasuries, would have on the value of the yen to the dollar. Please correct me if my understanding of this relationship is incorrect.

    A sizable repatriation without control would raise the value of the yen to the dollar - correct? A higher yen would not be good for Japan, making exports more costly to foreigners, what Japan does not want? Therefore, repatriation needs to be controlled by Japan to hold the value of the yen down, beginning with the government injecting huge sums of money into the Japanese economy to reduce repatriation.
    I am assuming that should there be a sizable withdrawal of U.S. treasuries or bonds that the U.S. government would have to increase the yield to attract replacement investors, stabilizing or affecting the price. The U.S. government having to pay more in interest adds to the deficit, troubling.

    My questions is with my long-time confusion about a strong or weak currency of any country. Using dollars as the standard, a strong dollar is good for the U.S., attracting foreign currencies believing in safety, and enabling importers to purchase goods cheaper, the reason we import so many products from Asia.

    On the other hand, the same strong dollar hurts U.S. business, making U.S. produced goods more expensive for foreigners to buy, thus restricting U.S. exports, as well as sales within the U.S.

    My basic question is which is better, a strong or weak currency, why, and how does a country strengthen or weaken their currency? It appears to be a double edged sword. Is there a balance? If so, at what point and how is the optimum balance determined/achieved?

    I have never understood the economics of international currency traders/speculators, and how or why the value of the dollar affects stock prices on a daily basis. The Japanese crisis brings these questions to the forefront, since the U.S. is dependent on foreign countries to finance such a huge portion of our national debt created by irresponsible U.S. politicians. In reality, our economy is dependent on and financed by foreigners/investors, not Americans. And we claim to be the wealthiest country in the world?

    Any intelligent and meaningful replies/explanations will be appreciated.

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    • yourbestfriendintheworld yourbestfriendintheworld Mar 18, 2011 12:52 AM Flag

      No. You're right. Having different currencies is lunacy, for the simple reason that it adds another way for fixers to profit from people's desperation.

      And you're right that it's all up to your personal stake in the matter as to whether your home currency should be strong. If you're a producer, you want it weak. At least until you retire. If you're a consumer, you want it strong, until you retire, then you want it stronger. If you're an investor, you want it strong while you're buying, then weak while your investments are growing, then strong right after you cash-out. Treating cash as a commodity is a strategy, but the recursiveness of valuing cash in cash terms is, again, lunacy. Which is why having another currency to value it in is lunacy.

      But that's how sovereign nations behave. They mint their own coin, and set its value by fiat in some cases, so the other nations insist on being independent of the lunacy of lunatic sovereigns. So we're stuck with worldwide lunacy.

      Nations manipulate their currency valuations to help their political situation internally; make it stronger to help the consumers; make it weaker to help the producers, hence in a roundabout way the workers, but they get screwed out of their share by the owners, so that's macchiavellian politics, really.

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