zerohedge.com / by Tyler Durden / 01/22/2013 11:30 -0500
Germany and Japan have a long tradition of cooperating, at least when it comes to various iterations of world war, generically in the conventional sense (and where they tend to end up on the less than winning side). Which is why it may come as a surprise to some that earlier today German politician Michael Meister launched what is now the third shot across Japan’s bow in what is rapidly escalating as the most dramatic case of global currency warfare between the world’s net exporters (at least legacy net exporters: thanks to Japan’s recent political snafus, it has now become a net importer as it is rapidly losing the Chinese market which accounts for some 20% of its exports) which started as long ago as 2010 when it was quite clear that currency warfare is what the insolvent world can expect, before it devolves into outright protectionism, and finally regular war as Kyle Bass explained recently. To wit: “What can Japan’s competitors do?” Meister said today in a telephone interview. “Either we’re all smart and do nothing, or we follow suit and create a spiral that hurts us all.”
Something tells us the “we will follow suit” is the right answer, as the only option left for the world which has no internal demand (i.e., consumer credit capacity to fund in house purchases of goods and services) and is destined to seek outside trade markets and inbound flows to generate inflation. But then again, none of this should be news, although perhaps it is to the EUR which has seen a rather rapid deterioration now that it is becoming very clear that what we have said, namely that Germany needs a weaker EUR to boost exports, is the only option for Europe.
And, as noted, he is not the first, nor the second, but the third in just one week to warn of what is coming. From Bloomberg: “Meister is the third senior German official to take issue with Abe in a week. Finance Minister Wolfgang Schaeuble attacked Japan’s “false understanding” of monetary policy in a Jan. 16 speech to the lower house, saying it will pump “excessive liquidity” into global financial markets. Bundesbank President Jens Weidmann said in a speech in Frankfurt yesterday that Abe risked “politicizing” the yen’s exchange rate.”
Japan’s response: Open-Yended monetization as reported last night. Certainly everyone will just sit there and watch as Japan does all it can to control an even greater portion of the export market and boost its GDP at the expense of all other trade deficit surplus nations. Certainly. This, naturally, ignores the very “GDP boosting” almost real war that Japan and China are increasingly finding themselves in.