[roccman]

http://www.fxstreet.com/rates-charts/currency-rates/

[Bas]

the yen is up, not down, and mostly against the dollar.

[roccman]

$this->bbcode_second_pass_quote('Bas', 't')he yen is up, not down, and mostly against the dollar.

[Bas]

If the yen goes up as it is now, it suggests that more of the carry trade is unwinding, yes.

[mmasters]

Since few seem to understand what's going on I'll help explain it.

The Yen is going up against other currencies because of how the fractional banking system works. In the fractional reserve process money is created and destroyed. The moment it is created is when a loan is made (causing inflation) and the moment it is destroyed is when that loan is payed off (causing deflation). To better understand and conceptualize this process search up a thread of mine from a month or two ago called "Money Creation Diagrammed"

So anyhow, there is a huge amount of loans that have been taken out in Japanese Yen to fund globalization (the carry trade). Why Yen? Because borrowing Yen requires almost no interest payment (the annual interest is like 0.5%) and that provides an incentive for speculators to take out cheap loans (to put toward investments that get a larger return than the .5% interest owed).

Problem is right now the market sucks and investments are going sour. As a result, people are rushing to pay off this borrowed Yen so they don't end up in debt on it.

So as this loan money gets returned it essentially gets destroyed or vanishes into nothing (causing deflation). This in return causes the existing yen to have a greater value because there is less of it in circulation. And that is what makes it worth more relative to other currencies.

[SinisterBlueCat]

mmasters, thank you for that simple, yet simply brilliant reply!

[firestarter]

$this->bbcode_second_pass_quote('mmasters', 'S')ince few seem to understand what's going on I'll help explain it.

The Yen is going up against other currencies because of how the fractional banking system works. In the fractional reserve process money is created and destroyed. The moment it is created is when a loan is made (causing inflation) and the moment it is destroyed is when that loan is payed off (causing deflation). To better understand and conceptualize this process search up a thread of mine from a month or two ago called "Money Creation Diagrammed"

So anyhow, there is a huge amount of loans that have been taken out in Japanese Yen to fund globalization (the carry trade). Why Yen? Because borrowing Yen requires almost no interest payment (the annual interest is like 0.5%) and that provides an incentive for speculators to take out cheap loans (to put toward investments that get a larger return than the .5% interest owed).

Problem is right now the market sucks and investments are going sour. As a result, people are rushing to pay off this borrowed Yen so they don't end up in debt on it.

So as this loan money gets returned it essentially gets destroyed or vanishes into nothing (causing deflation). This in return causes the existing yen to have a greater value because there is less of it in circulation. And that is what makes it worth more relative to other currencies.

[roccman]

$this->bbcode_second_pass_quote('firestarter', '')$this->bbcode_second_pass_quote('mmasters', 'S')ince few seem to understand what's going on I'll help explain it.

The Yen is going up against other currencies because of how the fractional banking system works. In the fractional reserve process money is created and destroyed. The moment it is created is when a loan is made (causing inflation) and the moment it is destroyed is when that loan is payed off (causing deflation). To better understand and conceptualize this process search up a thread of mine from a month or two ago called "Money Creation Diagrammed"

So anyhow, there is a huge amount of loans that have been taken out in Japanese Yen to fund globalization (the carry trade). Why Yen? Because borrowing Yen requires almost no interest payment (the annual interest is like 0.5%) and that provides an incentive for speculators to take out cheap loans (to put toward investments that get a larger return than the .5% interest owed).

Problem is right now the market sucks and investments are going sour. As a result, people are rushing to pay off this borrowed Yen so they don't end up in debt on it.

So as this loan money gets returned it essentially gets destroyed or vanishes into nothing (causing deflation). This in return causes the existing yen to have a greater value because there is less of it in circulation. And that is what makes it worth more relative to other currencies.

[master_rb]

hi mmasters

everything in your post made perfect sense and thank you for that but there's one thing i don't get, investors try to pay off the loan in yens, but why? since it's low interest they should try to pay off the ones in dollars, euros, other currencies first and leave yens as the last ones to take care of, this is just my thinking and i have no idea about markets and stuff, can you somehow how give a bigger answer to it, just as clear as the one you gave before but with more details

thanks ahead

[Tanada]

$this->bbcode_second_pass_quote('master_rb', 'h')i mmasters

everything in your post made perfect sense and thank you for that but there's one thing i don't get, investors try to pay off the loan in yens, but why? since it's low interest they should try to pay off the ones in dollars, euros, other currencies first and leave yens as the last ones to take care of, this is just my thinking and i have no idea about markets and stuff, can you somehow how give a bigger answer to it, just as clear as the one you gave before but with more details

thanks ahead

[Tyler_JC]

How do you make the leap between a modest rise in the value of the Yen and a US-led suicide invasion of Iran?

Meanwhile, back on planet Earth...

As the value of the Yen increases, Japan's exports will become less competitive, reducing the country's trade surplus and bringing the currency back down.

International banking organizations can whine about losing their investment portfolios due to a rising Yen but if Japanese exports decline even by a relatively small %, that slow-growing economy will be sent straight back into a recession.

[Tyler_JC]

$this->bbcode_second_pass_quote('Tyler_JC', 'H')ow do you make the leap between a modest rise in the value of the Yen and a US-led suicide invasion of Iran?

Meanwhile, back on planet Earth...

As the value of the Yen increases, Japan's exports will become less competitive, reducing the country's trade surplus and bringing the currency back down.

International banking organizations can whine about losing their investment portfolios due to a rising Yen but if Japanese exports decline even by a relatively small %, that slow-growing economy will be sent straight back into a recession.

[Eli]

$this->bbcode_second_pass_quote('master_rb', 'h')i mmasters

everything in your post made perfect sense and thank you for that but there's one thing i don't get, investors try to pay off the loan in yens, but why? since it's low interest they should try to pay off the ones in dollars, euros, other currencies first and leave yens as the last ones to take care of, this is just my thinking and i have no idea about markets and stuff, can you somehow how give a bigger answer to it, just as clear as the one you gave before but with more details

thanks ahead

[master_rb]

thanks Tanada

clear explanation, so the big picture is that the loans are in yens and not other currencies, what got me off was that i was confused why such a rush to pay off with the rates at 0.5 while others have it at 5 or so

thanks again

[Eli]

Notice too the dollar strengthened against the Yen today after the Fed speech today. The Fed did not say they were going to lower rates and the Yen settled down at 113.55 today.

This is not a coincidence, the Fed knows if they lower too much to fast the dollar could melt down. The Yen would shot up in value to 110 105 and the stock market would melt.

Lots of interesting stuff going on in the global markets.

[dukey]

they want a slow decline
if they slash rates the dollar will just crash and all hell will break loose