The Yen, Gold and Swiss Francs.

Show me teh moneyz!

    Here we have the Bank of Japan intervening in the Yen to US Dollar exchange rate which hit an all time low (but I thought that was meant to be high?) since the Post-World War II. Apparently the bank did this by purchasing the Dollar on mass, with a major selloff of the Yen which helped the Yen to climb back up to 78 Yen, with the Nikei showing gains as well. But it seems like the efforts were futile as at the end of the day Nikkei went down, along with other major markets across Asia as a result of the massive sell-off taking place on Wall Street. 

    The effect of rise of the Yen against the dollar is apparent; much like any export reliant countries, a strong domestic currency would definitely hurt its economy. South Korea is currently facing similiar problems as well - both as a direct result from the collapse of Wall Street, shaken as a result form the loss of investor's confidence on America's & Europe's debt crisis. I'm so sleepy I feel like dying  One thing which grabbed my attention is how the price for Gold & Swiss franc would normally increase during economic recessions. I can understand swapping your investments to Gold, one month low-yielding government bonds, but why the Swiss Franc? Even the Swiss Central Bank had to lower its domestic interest rates to cope with its the sharp increase which would have had adverse effects on its economy.

I should look into this.

Cronny Capitalism In America

Fiscal Indulgences, The Economist.

An article related to America's Fiscal Policy which enacts tax expenditures which favors certain industries, sub-industries, corporations and individuals, being compared to the church's practice in selling indulgences.

I thought only Asians practiced cronny capitalism?

Well, at least thats what the Western Media  taught me.

What a joke.

China's Economy : Export or Domestic Driven?

Y u no tell me teh tru storeh?

    In a recent article by McKinsey Quarterly which I nearly fell asleep reading, the author suggested that the perception that China is turning into a major Export-driven economy (much like South Korea and Japan) is somewhat untrue. The author proceeded to introduce his own theory called Domestic Value Added Exports or simply abbreviated as DVAE which calculates China's exports by subtracting total exports from imports used in the production of goods and services which subsequently are meant to be re-exported. This is done to counter the following issues when dealing with conventional methods;

• Overestimation by failing to remove imported goods (raw materials or components) which are used for manufacturing and subsequently re-exported. This is particularly evident when measuring the contribution of total exports to the GDP.
• Underestimation as a result of the inclusion of finished imported goods which are then used for domestic consumption when using the Net Exports method (export less imports).

    The results from the application of DVAE (see article) in measuring China's actual exports indicated that China's exports seems to be overestimated, and actually slowing down within the past couple of years. Personally, I do think that the perception of China being an export-driven country is somewhat untrue. I think that come 10, 20 years, they would shift away from being a manufacturing-based country into a domestic-led economy, as evident in most developed countries. Let's face it, Chinese people are good at making money. They're a lavish good spender too.

    In another article relating to China's rising domestic consumption and disposable income, much has been discussed about the Chinese mentality of parading their personal belongings, coupled with a thrifty attitude, unlike their western counterparts. This sort of mentality is apparently a direct result from the constant years of the oppression by the communist state. But whether they will continue their domestic consumption will continue or not, much depends on whether the government is competent enough in battling key issues such as the country's inflation rate, risk of overheating, and its fiscal or monetary policies. The last thing the country would want to face after years of constant growth and trade surpluses is to end up in the middle income trap.

That would suck.