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On Friday's Side Meeting For G7 Finance Ministers
Submitted by Faros Trading
We are increasingly interested in the Currency-Focused Side meeting that has been arranged at the IMF Meeting on Friday. We note with the weakening USD and increased talk of trade wars, that the possibility of a new 'Plaza' Accord is now not out of the question.
We note that at the time of the Plaza Accord the US Current Account as a %age of GDP was running at 3-3.5%. In Q2 2010 the US current account as a %age of GDP was 3.4% of GDP. Also going into the Plaza Accord, interest rates were near all time lows in most countries, a similar situation to today.
In 1985 Germany and Japan financed the US deficits through purchasing US fixed income. This time around China and Japan are the primary financiers. Following the Plaza Accord, Japan and Europe saw their currencies strengthen by 50% and the US weakened by the same amount. With a Current Account deficit at elevated levels once more, interest rates at near lows and trade wars looming another Accord may be on the near-term horizon.
Given the G20 Meeting will be located at the Hyundai hotel in South Korea, perhaps this will be called the 'Hyundai' Accord.
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Chart: ES and ZB
They'll be laughing at Ben and Tim.
http://99ercharts.blogspot.com/2010/10/es-and-zb_06.html
It's worth postulating on, but there will be no coordination. We are running towards the end game of the fractional reserve fiat currency system. At this stage it will be every 'man' for himself. Japan could not suffer a further strengthening politically. They are desperate to jumpstart their economy before their demographic train-wreck hits with full force. In Germany, they need to support all of the EU, with the long-shot that a call for a strengthened currency would allow them to recreate the DM.
And no one really wants to buy US fixed income. They see the writing on the wall...
We will have no coordination (except in some BS veneer) as each country tries to survive the coming onslaught of debt destruction. There will no one left standing...
Your correct, we are at the end game for the fiat system and also the debt system that Western banking was based on. Not just Japan but the US and even parts of the EU are having a demographic change both with more elderly and less younger people. The only way to fix that is to allow more immigration but countries are in a quandry because more immigration allows people that are "different" than the society that it is replacing. Who knows, Japan will have an increase of citizens that will have japanese names but are dutch or Brazilian (already happening), German, Pakistani, etc. etc.. But on top of that those countries need to make jobs for these individuals to work at so they can fund via the taxes the older countries retires.
I've said for since the start of the Greek meltdown that Germany is looking for a way out of the Euro to the DM. Since they subsidize the majority of the EU, why not just have their currency and be done with it. The EU knows that if Germany leaves it would kill the EU. Not because other will leave, but as I stated before they subsidize much of the EU.
Waiting for WB's Geithner in a Hyundai, you know, the college game of how many coeds, I mean finance ministers can pile into the tiny car?
'Hyundai Accord'. Thank you, very good ;-)
oh good - a stock market crash and deflation in our future lol
Big Lunch,Big Expense Account,Experienced Sexy Secretary,No Accountability,Gold Plated Pension Guaranteed - Another Finance Minister,Another G7 meeting - Another Cock-up.
As the fall schedule of events for upcoming Weekend's at Bernie's gets set.