This page has been archived and commenting is disabled.

Historical Precedent To Predict The Success Rate Of The G7 Yen Devaluation "Accord"

Tyler Durden's picture





 

Even though last night's G7 Yen intervention still has no name, it likely will very shortly. After all, all key previous global currency interventions have received names according to where they took place, notable ones being the Plaza Accord from 1985 which took place in the Plaza hotel in New York in 1985, which was supposed to depreciate the dollar against the Yen (in essence the opposite of what happened last night), and the Louvre Accord from 1987 which was the aftermath of the Plaza accord which worked so well two year later the central powers met again to halt the ongoing dollar depreciation (primarily against the Yen and the Mark). So how successful have these operations been historically? Well, when it comes to killing the dollar (Plaza) the success rate was stunning. So stunning in fact that as noted, another accord had to be implemented to halt the $ decline. That one did not work out so well: in fact following the Louvre Accord the dollar continue to decline for another 2 years! So if last night's attempt to strength the dollar (weaken the yen) is to be judged by historical precedent, the half life of the G7 intervention may be extremely short lived.

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 03/18/2011 - 09:37 | Link to Comment ziggy59
ziggy59's picture

(second time admitting intervention) NY Fed confirms intervention in currency markets

 

http://www.breitbart.com/article.php?id=D9M1LF5G0&show_article=1

 

Fri, 03/18/2011 - 09:38 | Link to Comment midz
midz's picture

The Honda Accord.

Fri, 03/18/2011 - 09:41 | Link to Comment dick cheneys ghost
dick cheneys ghost's picture

lmao.........

Fri, 03/18/2011 - 09:41 | Link to Comment Cursive
Cursive's picture

@midz

Seconded. :-)

Fri, 03/18/2011 - 09:41 | Link to Comment 4xaddict
4xaddict's picture

+1 awesome!

roflmao

Fri, 03/18/2011 - 09:52 | Link to Comment iota
iota's picture

Yours for just $5bln down and 36 monthly payments of several millions.

Fri, 03/18/2011 - 10:01 | Link to Comment nevadan
nevadan's picture

I love this website!

Fri, 03/18/2011 - 10:20 | Link to Comment falak pema
falak pema's picture

How about the Mata Hari accord. If this is a false flag operation in the interests of some unknown Fu Man Chu. (You know whom I mean...'cos I don't! But that's irrelevant to the issue like in all cloak and dagger games. Just as long as there is a villain we'll always find a hero or vice-versa! Especially if Mata Hari is played by Angelina Jolie, box office guaranteed!)

Fri, 03/18/2011 - 09:38 | Link to Comment forexskin
forexskin's picture

ummmmm, stop the printing presses?

 

ben - hello, bennnyyyyy are you there?

Fri, 03/18/2011 - 09:39 | Link to Comment Elmer T Pudd
Elmer T Pudd's picture

They do this every day anyway.  The recent G7 Meeting was just a time out to adjust a new offense to a failed defense.

Fri, 03/18/2011 - 09:39 | Link to Comment Dr. No
Dr. No's picture

The biggest supporter of a weak Yen is the US.  If the Yen continues to strengthen, Japan will consider liquidating their treasuries.  Once liquidated (to the FED Pomo) and US dollar cash in hand, Japan will begin to purchase goods, services, and commodities with these dollars. 

Mr. Timmah is sweating right now.

Fri, 03/18/2011 - 10:23 | Link to Comment MachoMan
MachoMan's picture

If they were going to liquidate treasuries, why would they not have done so already?  Wouldn't it be dollar bullish in the immediate term and any unspent dollars would counteract any attempt at yen devaluation?  If this would not trigger a treasury sale, what will?  Further, what would a commodity grab do to an export model, at least in the short-medium term?

It seems to me that there is a concerted effort NOT to sell treasuries...  why does China come out of hiding and all of a sudden display its massive treasury holdings after months of pretending to sell?  Seems like a rock and a hard place for export countries.

Fri, 03/18/2011 - 09:41 | Link to Comment John Law Lives
Fri, 03/18/2011 - 09:40 | Link to Comment RobotTrader
RobotTrader's picture

Who would have thought that the Plutocrats would have been able to pull off:

- Libya Ceasefire

- Restore power to nuclear reactors

- Smash oil prices

- Rally bank stocks with dividend rumors

- Destroy the Yen after an epic chart breakout

In one fell swoop?

Man, these guys are good.

Proof that "Paper" can solve almost any crisis.

 

Fri, 03/18/2011 - 09:46 | Link to Comment Cursive
Cursive's picture

@ Robot

Lulz. Neville Chamberlain.

Fri, 03/18/2011 - 09:49 | Link to Comment cossack55
cossack55's picture

I know for a fact it helps ease crises in my bathroom on a daily basis.

Fri, 03/18/2011 - 09:55 | Link to Comment Dr. Richard Head
Dr. Richard Head's picture

"Proof that "Paper" can solve almost any crisis."

...until the next greater crisis comes along.  Bush's first stimulus plan had a life of what 4 years?  Obama's fiat ejaculations dried up pretty quick bringing in QE, QE 1.5, and QE2 all within two-three years. 

More money now equals less time purchased.  Place your bets accordingly.

Fri, 03/18/2011 - 09:57 | Link to Comment Sophist Economicus
Sophist Economicus's picture

Speaking of paper, Dollar futures knocking on 76 handle and USD/JPY elixir wearing off

 

Gonna be an interesting afternoon

Fri, 03/18/2011 - 09:41 | Link to Comment wandstrasse
wandstrasse's picture

back in the 80s the ratio real-economy vs financial-market was not as absurd as it is today. All the economic theories, rules, patterns, corelations do not apply any more.

Fri, 03/18/2011 - 09:42 | Link to Comment Shock and Aweful
Shock and Aweful's picture

They don't get it...

Although these central planners think they have it all under control....me thinks that the world economy is just too big and complex to have all of the angles figured out...that there will always be some unanticpiated crisis or problem that arises out of manipulating markets like this.

There is no way for these G-7 fuck-tards to know for certain what pushing this financial button or that one will do - especially long term, for both their local and the world economies...they think they know...but they are really just acting out of blind desparation.  That is pretty obvious I would say.  No?

Fri, 03/18/2011 - 09:42 | Link to Comment Bearster
Bearster's picture

The difference between the 1980's dollar decline and the current yen spike is that in the 1980's, dollar-denominate credit was expanding faster than credit in other currencies, thus the declining value of dollars.  The current yen spike is not based on value, but based on an acute emergency driven demand for yen.  There's no question the dollar is going to zero, but there is equally no question the yen is going to zero.  Faster.

Fri, 03/18/2011 - 09:42 | Link to Comment Cursive
Cursive's picture

Imagine a world where common weights and measures are changed daily by an international organization. That's how fucked up our money system is.

Fri, 03/18/2011 - 09:51 | Link to Comment eftian
eftian's picture

Nice analogy

Fri, 03/18/2011 - 09:53 | Link to Comment Internet Tough Guy
Internet Tough Guy's picture

They are playing 1980s games far too late. Central bankers are dinosaurs and will become extinct.

Fri, 03/18/2011 - 09:53 | Link to Comment johnQpublic
johnQpublic's picture

i havent gained weight, i've lost value.....?

Fri, 03/18/2011 - 10:17 | Link to Comment Cursive
Cursive's picture

Shoe sizes? Fuggetaboutit. 6.5L eco-boost diesel engine? Maybe it is 6.5, but not your daddy's 6.5. That 100 GB SSD you're looking at? You'd hsve to check the date of manufacture to see what "100 GB" meant. FUBAR.

Fri, 03/18/2011 - 09:44 | Link to Comment John Law Lives
John Law Lives's picture

Considering the internet bubble and subsequent collapse... and the housing bubble and subsequent collapse... we should have no doubt that the US Central Bank knows how to manage the economy.  They have a stellar track record.

Fri, 03/18/2011 - 09:43 | Link to Comment Bull v. Bear
Bull v. Bear's picture

Yentervention bitchez...

Fri, 03/18/2011 - 09:45 | Link to Comment LoneStarHog
LoneStarHog's picture

Since it was done by telephone, just call it Failsafe. Unfortunately, there was no high-pitch whine from all their phones, like in the movie.

Fri, 03/18/2011 - 09:44 | Link to Comment Mae Kadoodie
Mae Kadoodie's picture

Robo, that's how captured markets work, right?

Fri, 03/18/2011 - 09:47 | Link to Comment Jack Sheet
Jack Sheet's picture

Good complementary analysis by Peter Schiff here:

http://www.youtube.com/watch?v=4vz345JnZUo

His expectation: Japan will eventually have to sell their  US treasuries

Fri, 03/18/2011 - 09:58 | Link to Comment iota
iota's picture

"A stronger yen would aid in reducing rebuilding costs"

That's far too much common sense right there.

Fri, 03/18/2011 - 10:00 | Link to Comment r101958
r101958's picture

Couldn't have said it better myself.

Fri, 03/18/2011 - 10:13 | Link to Comment CitizenPete
CitizenPete's picture

Schiff brings it all back to basic Austrian School economics and IMO he is usually spot on.  Timing is and issue and government interventions comming from all angles (and usually at the tip of a rifle) tend to warp and postpone the inevitable.  But IMO he is usually correct.

 

Humanity in any language - video of Japanese running from Tsnunami - I wonder what happened to the family of three?

http://www.youtube.com/watch?v=vC0OFT8WWHk

Fri, 03/18/2011 - 09:48 | Link to Comment cossack55
cossack55's picture

Since it involves Japan and current crisis:

The Half-Life Accord

Fri, 03/18/2011 - 09:48 | Link to Comment iota
iota's picture

So at the current rate, they have about a week, possibly two before we're back to pre-intervention levels.

Fri, 03/18/2011 - 09:48 | Link to Comment itiswhatitis
itiswhatitis's picture

The Hari Kari Accord

Fri, 03/18/2011 - 09:54 | Link to Comment Janice
Janice's picture

Wonder what China thinks?  They are the 2nd largest debt holder and not in the G-7 club.

Fri, 03/18/2011 - 09:54 | Link to Comment Tense INDIAN
Tense INDIAN's picture

so close to my TARGETS.:::

 

http://markettechnicals-jonak.blogspot.com/

Fri, 03/18/2011 - 09:58 | Link to Comment falak pema
falak pema's picture

Their ability to control the currency war and make market forces bend to their wishes has as much chance of success as dropping water from buckets on those simmering reactors from far. They must ride the whirl wind that they have whipped up to frenzy levels by their own inconsiderate actions of QE-to-infinity in FED, CBE, now BOJ. It is just awesome the level of crass cowardice, oligarchic corruption and incompetence; as blind as the Tokyo Electric Inc. show up to date. But they at least had a justifiable excuse : mother nature, mega tsunami. Here it is totally self inflicted necrophilic damage from blind greed and praying to the all powerful god of the financialized bubble economy. 

Fri, 03/18/2011 - 10:01 | Link to Comment spanish inquisition
spanish inquisition's picture

Help me figure something out. The same group of people own the central banks. They just sat around and said "I need you to buy red beads and sell blue to increase the level of yellow".

If everyone in the world sold Yen today, these guys would get together overnight and we would wake up with Yen at 80. Even though no one in the world owned Yen?

So I am seeing it as a monopoly and they are setting the values of things (debt notes) against themselves to protect their own interests as owners of the money supply. Is that close? Too simplistic?

Fri, 03/18/2011 - 10:01 | Link to Comment r101958
r101958's picture

The Dis-Cord.

Fri, 03/18/2011 - 10:29 | Link to Comment markmotive
markmotive's picture

I blame the Plaza accord for Japan's massive bubble during the late 1980s. Yen appreciation killed Japanese exporters and forced the BOJ to print, fueling a speculative frenzy.

http://www.planbeconomics.com/2010/06/21/plaza-accord-ii-and-yuan-peg/

So how will this play out in reverse?

Fri, 03/18/2011 - 10:28 | Link to Comment Vampyroteuthis ...
Vampyroteuthis infernalis's picture

The CBs can't stop (pardon the pun) tsunami of Yen that will be repatriated by Japanese citizens trying to survive when the country is shut down. Add on top of that, corporations, banks and local governments trying to save solvent. Pissing in the wind.

Fri, 03/18/2011 - 10:59 | Link to Comment Ferg .
Ferg .'s picture

David Rodriguez over at DailyFX posted this earlier . It's a chart showing the efficacy ( or rather lack of ) of the G7 intervention in EUR/USD back in 2000 ( September 23rd ) . As seems so often to be the case it merely provided a nice spike for speculators to sell into . Whatever about the stock market , FX is one arena where central banks get their asses handed to them during manipulation campaigns . 

 

http://twitpic.com/4ajl4j

Fri, 03/18/2011 - 11:52 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

Answer me this: the "reason" for the intervention is that this is to aid Japan so that its exports are not too expensive.  I know too well that this is bullshit, and is not the reason, and that the real reason has something to do with the yen carry trade, which I suspect underlies way too many highly leveraged transactions to have this unwind occur.

What is, or are, the reason(s) for this G-7 intervention.

Fri, 03/18/2011 - 12:24 | Link to Comment viahj
viahj's picture

Extension-A-Cord

Fri, 03/18/2011 - 12:25 | Link to Comment viahj
viahj's picture

double tap

Do NOT follow this link or you will be banned from the site!