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Carry Trade Volatility

The volume of prudential reserves held by each Euro-Dollar (foreign) bank presumably is dictated by “prudence” – not by any legal requirement administered by a monetary authority. All prudential reserve banking systems have heretofore “come a cropper”. Money creation by private profit institutions is not self-regulatory- the “unseen hand” simply does not function in this area. Invariably the systems created too much money, speculation became rampant, inflation distorted and destroyed economic relationships, confidence that the banks could meet their convertibility obligations eroded, “runs” on the banks caused mass banking failures, and entire economies were left in ruin.

Unwinding of the Carry Trade Has Finally Hit Currencies

The prudential reserves of the E-D banks consist of various U.S. dollar-denominated liquid assets (U.S. Treasury bills, U.S. commercial bank CDs, Repurchase Agreements, etc.) and interbank demand deposits held in U.S. banks. These are liquid balances in the U.S., or any other major currency country. If a bank’s balance is inadequate to meet a specific payment in the E-D system, it borrows in the London money market at or near the LIBOR rate (the London Interbank Offering Rate), a rate substantially below the prime rates of most banks. By both promulgating excessive money and credit creation and avoiding statutory reserve requirements, E-D banks are able to preserve their competitive advantages with lower interest rate loans.

The volume of prudential reserves held by each E-D bank presumably is dictated by “prudence” – not by any legal requirement administered by a monetary authority. All prudential reserve banking systems have heretofore “come a cropper”. Money creation by private profit institutions is not self-regulatory- the “unseen hand” simply does not function in this area. Invariably the systems created too much money, speculation became rampant, inflation distorted and destroyed economic relationships, confidence that the banks could meet their convertibility obligations eroded, “runs” on the banks caused mass banking failures, and entire economies were left in ruin.

Money Supply Indicator Supports Deflation Argument

No money supply figure standing alone is adequate as a "guide post" to monetary policy. & the money supply is unknown & unknowable.

Deleveraging Brings Another Perfect Storm to Japanese Equities

"lowest interest rates in the world, Japan may now have the world’s strongest currency" -- such is the rationale of day traders

Intense Inflation Pressure: Fed, Bank of England Have Their Hands Tied

“I don’t think you can interpret what’s happening with energy as a temporary shock.” -- William Poole. He is exactly right.

Economic output, interest rate differentials, etc. are merely short-term influences. The $7 trillion dollar current account deficit drives the exchange rate of the U.S. dollar. icandoitdon is exactly right.