G7 Intervention on Yen
March 18th, 2011It had to happen. Anyway, there’s the “free market” for you.
There’s a lot of mythology about free markets in mainstream texts books and corporate media, but when the wheels come off the cart in Fiat Currency Hell (and have no doubt about it, the wheels came off the cart with this Yen thing), the global Soviet Ministry of Currency Value Stabilization springs to life and says, “The free market is wrong here. Manipulation is necessary.”
Call this nonsense whatever you want, but it’s not a free market.
Maybe it’s Free Market Lite.
Or, Free Market Extreme!#@*!
Or, Free Market Plus.
I know:
Free Market — Now with Even More WTF?™
Via: Reuters:
The Group of Seven rich nations on Friday agreed to join in rare concerted intervention to restrain a soaring yen and calm global markets after a wild week of panicky trading as Japan scrambled to prevent a meltdown at a nuclear power plant.
The U.S. dollar surged two full yen to as far as 81.70 yen, leaving behind a record low of 76.25 hit on Thursday as the Bank of Japan kicked off the joint action. Media reported it bought more than $25 billion.
Japan’s Nikkei share index climbed 3 percent, recouping some of the week’s stinging losses as Japan reeled from an earthquake, tsunami and the nuclear power plant crisis.
The last time the G7 agreed on joint intervention was a decade ago to turn a slumping euro following its 1999 launch.
The G7 show of solidarity with disaster-hit Japan came as a surprise to many because Tokyo had indicated it was looking for moral support for its attempts to calm markets rather than joint action.
Japan’s Finance Minister Yoshihiko Noda said the Bank of Japan had begun to sell yen at 0000 GMT and other central banks from the G7 would intervene as their markets opened.
“This is the first coordinated intervention that we have seen since 2000 so it’s going to have a very huge resonating effect on the market,” said Kathy Lien, director of currency research at GFT in New York.
“Because the only type of intervention that actually works is coordinated intervention and it shows the solidarity of all central banks in terms of the severity of the situation in Japan.”
A source told Reuters the BOJ would also leave the yen it sold in the banking system rather than mopping it up, thus adding to the vast amount of liquidity it had already provided to support its domestic markets.
Free Market — For a limited time, while supplies last!