Central Banks Are Still Trying To Convince Us This Isn't A Currency War
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Central bankers claim that they aren’t starting a currency war. They deny that their policies are aimed at the competitive devaluation of their currencies. Let’s call it competitive ultra-easing. Consider the following:
(1) BOJ is going wild. On April 4, Japan’s central bank announced a plan to double the monetary base over two years from 138 trillion yen at the end of 2012 to 270 trillion yen at the end of 2014. (That would be $2.7 trillion at an exchange rate of 100 yen per dollar.) Reserve balances jumped 13.3 trillion yen during April. The yen has plunged from 79.39 on November 13, 2012 to 101.6 on Friday. The Nikkei is up 68.7% over this same period.
(2) China loans are still going strong. On Saturday, Bloomberg reported: “China’s new local-currency loans exceeded estimates last month while money supply expanded at a faster pace, a sign policy makers are maintaining credit support for the economy after first-quarter growth unexpectedly slowed.” Lending was 792.9 billion yuan ($129 billion), and M2 rose 16.1% y/y in April.
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