By SD Contributor AGXIIK
February 13, 2013
The trade between Japan and Europe and China and Europe will be hit very hard when Europe can’t afford goods from China and Japan. The east will suffer badly as devaluations won’t overcome the recessions and depressions in Europe.
These are real and dangerous tipping points that won’t hold back very long. The people in Italy, Greece and Spain are near the breaking point. I doubt if the Fed will have enough money to bail out Europe when Benny is spending all his political capital in bailing out the US, although I would not be surprised if the Fed doesn’t give it a try, nonetheless.
If we thought 2012 was the year of the epic failure, it may have been just a warmup act to 2013.
Virtually all the big GDP countries are engaged in ZIRP printing to devalue their currencies, racing to this end to keep the trade engine going.
All the major GDPs are showing red arrows in their economic indicators. For one country to win, others will be hurt.
Japan, China, the EU and US are all on track to accomplish this rampant devaluation business. Japan is probably on a fast track to the bottom in their current bout of devaluation.
Abe is out for war, FIAT or hot, it does not seem to matter to him South Korea is being hammered by the Yen but they are unlikely to launch missiles against the Japanese homelands.
China sees these FIAT effects on their exports. What affects China in that regard is going to have repercussions that could easily go beyond a war of words and money as these two countries face off over the Sendaku Islands. China’s currency reserves are 300% larger than Japan’s. That is some serious ammunition to use is trade wars.
The bond bubble could easily be broken in a currency or a shooting war. Either way, the fragile bubbles could be popped with ease and at the slightest pressure. Japan’s largest pension fund, with $1.2 trillion in assets, is trying to lightened up on Yen bonds. Other funds are trying to buy gold.