8/5 No so Much Yen for You

Written on August 5, 2010

Greetings-

The US government hasn’t gotten many kudos from me of late. So, here it goes.

First, great job on cleaning up the Gulf so fast. I understand that politicians traveled to the Gulf and managed to blow 75% of the oil spill away with hot air and threats of lawsuits… Hats off and great use of alternative energy (hot air). 200,000,000 gallons of oil. 643,000,000,000,000,000 gallons of water in the Gulf. Simplifying that is 1 gallon of oil for every 3,215,000,000 gallons of water. I drop per ml. Every 1 ml = 0.000264172052 US gallons.

So…there is a single drop of oil for every 849,313 gallons of water. Guess Ryan at Exxon was right…the plankton will eat the rest.

Secondly, congratulations to the US for its unheralded success in a near perfect “banana republic” devaluation against our second highest lender, Japan. Really, this is the stuff that put South America on the front pages in the 70’s, 80’s and 90’s. Who wouldda thunk we could successfully employ their strategies? The Europeans go to aid the Greeks and protect the Euro utilizing budget cutting and wage reductions. Not the US, we’ll devalue your ass.

Even though the Japanese have increased their dollar debt holdings by 36% since late 2007, they will be paid back only 94% in their (Yen) terms…too bad, so sad, maybe your luck will change, thanks for playing, have a nice day. Come back again real soon. Pleasure doing business with you.

Japan Doubles Down:

US Treasury Debt $Blns Exchange Rate Total Yen

(November, 2007) 580.0 USDJPY@123 71.3 Trln

(May, 2010) 786.7 USDJPY@ 85 66.9 Trln

If only the US could get the Chinese to play along using “house rules.” But, no…the Chinese, remain relentlessly pegged to the US dollar even after ten years of US politicos crying and shouting “unfair, unfair.”

It is (was) a pleasure to be the world’s sole reserve currency. Japan did its job and took one in the shorts for our team. But, the Chinese have no respect…no respect I tell ya. (think Rodney Dangerfield). Not sure the Japanese will do it again at 3% ten years.

I’ll pass this along. A wise friend that I respect is adding to his gold positions here. Perhaps silver is worth watching as an indicator. Early in 2008, when gold first hit $1000, silver blasted over $20. Gold since then rallied another 26% and silver has not seen $20 again.

Blessings,

Leon