Japanese Yen – a Negative Beta Indicator
Japanese Yen – a Negative Beta Indicator
Japanese Yen – a Negative Beta Indicator
Sunday, October 26, 2008
By Adam Perl
The markets experienced another action-packed week as continuous worries about the economic situation sent the major indices plummeting across the globe. Even though the intensity began to pick up during the week due to various economic data and comments from ex-Fed chairman – Alan Greenspan, most of the volatility was felt towards the end of the week as the Asian markets yet again pushed the “sell-off” button, causing global indices to perish. The U.S market gapped down on Friday following the opening bell by over 5%. In addition to all the anxiety in the market, earnings of various leading companies fell short of their estimates, dropping like bricks. Gold, once classed as a safe haven during economic problems, continued its path down last week touching a low of 1 per ounce before retracing back part of its losses. To date, after extensive monetary actions the low yielding Dollar has become the new “safe-haven”. Even though interest rates of other economies are still yielding much higher interest than the U.S’s 1.5% fund rate, expectations of further rate cuts among deteriorating economies like the U.K is sending money back into the U.S Dollar. The Greenback continued to rise last week against most of its counterparts, excluding the Japanese Yen. The Dollar index bounced higher throughout the week and is now trading at 86.42 points. When analyzing the charts one can see that the lowest yielding currency pair, the Japanese Yen, yielding only 0.5% is rallying against the U.S Dollar. Why would investors prefer a 0.5% return when they can receive higher interest on other currencies?
A Walk down history Lane
After World War II most of Japan’s economy was demolished, millions of citizens were jobless and the government’s main aim was to rebuild the economy back up from scratch. For years to come, Japan’s economy based itself on manufacturing, services, shipping, machine tools and exporting motor vehicles which seemed to be the economies main source of income. The irony is, that those same countries that demolished Japan’s economy, such as the U.S, helped reestablish it by becoming their prime consumers through exports.
Even though Japan’s economy faced many obstacles along the way: other growing economies that based their incomes on those same goods and rising oil prices that
The Federal Reserve Bank – America’s Big Unspoken Problem
The Federal Reserve Bank – America’s Big Unspoken Problem
Indeed there are plenty of problems facing the United States of America today. Of course, there have always been problems and probably always will. It’s the nature of things. There are lots of things one can do about problems. You could panic. You could consult with friends. You could write down a plan. You might have to take immediate action. Every problem is different. The one action that most agree is a bad idea is ignoring a problem. Even worse is to adapt behaviors that help the problem along.
The Federal Reserve is the one of the biggest problems facing America today and it is being ignored and in fact being made worse in many ways. Front runner Presidential candidates never mention those words and when someone does there is an uneasy feeling in the air, especially in debates. Of course, the only people who will dare say those words in a debate have been marginalized and in my humble opinion it seems like no coincidence.
People might ask, what does a federal government bank have to do with our nation’s problems? For starters it is federal in name only. The Federal Reserve Bank is not part of our government. It is privately owned. It is an international bank with private owners. Well, you would think with a name like that it would be part of the government. Why would a name be chosen to disguise what they are? Precisely for the reason you would suspect. They didn’t want people to know what they are all about.
Unfortunately people aren’t generally concerned with how things work. They don’t want to see the big picture or gain knowledge about the world in which they will live. It’s this nature of many people that helped the Federal Reserve Bank do their thing.
To illustrate the point, here’s a simple overview and how the problem might manifest itself in a real life example.
Throughout history the world has had banks, bankers and money lenders. People sometimes need money in the form of loans for various reasons. The general practice is that if you borrowed ,000 you would have to pay it back over a specified time at a certain rate of interest which is agreed upon by both parties. Okay, nothing dangerous about that. Now imagine that a government needs money. The government has a war to fight and a clever banker agrees to lend a sum of money to that government. Of course, to lend such a large repayment of the loan must be guaranteed. So in
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