Guest Post: While All Eyes Are On Europe, Japan Circles A Black Hole
by Charles Hugh-Smith
While all eyes are on the absurdist tragicomedy playing out in Europe, Japan is quietly circling a financial black hole as its export economy is destroyed by its strong currency and the global recession.
There is a terrible irony in export-dependent nations being viewed as “safe havens.” Their safe haven status pushes their currencies higher, which then crushes their export sector, which then weakens their entire economy and stability, undermining the very factors that created their safe haven status.
As long as Germany stays within the Eurozone, Japan is the primary example of this dynamic. Should Germany leave the euro and return to its own currency, it too will begin orbiting the financial black hole of declining exports driven by a strengthening currency in a global recession.
Economies that are less reliant on exports are much less exposed to the consequences of a strengthening currency.
We can lay out the dynamic of Japan’s currency and export-dependent economy thusly: