This USA-Japan dollar-yen swap is triggering off my bologna-economics meter. So, if I understand correctly...

- US sends dollars to Japan, Japan sends Yen to US. (US "bought" Yen with dollars)
- Assumption: this will help stabilize the Japanese financial situation and...
- Assumption: ...thus strengthen the Yen.
- Then, when it's time for Japan to sell back those US dollars (i.e., pay back the loan), Japan would now need more dollars so as to buy back the now-more-valuable Yen.

Seems we're making large leapfrog leaps here. The Achilles heel in my view is the Keynesian assumption that dumping money into circulation is magically beneficial. This dollar dumpage is being branded as "liquidity" for Japan, but however you look at it, it's still more money in circulation. Plus, that's money that came from who-knows-where? That is, magical money appearing from thin air.

Assuming things go well and in the future Japan is going to buy back the now-more-valuable Yen. They would need more dollars to do so, but where would they get those extra dollars? I think a few things:

1. The unspoken is that inflation (AKA dollar devaluation) is expected to happen, thus making it easier for Japan to gather up more dollars to buy back those initial Yen (it's easier to pay off the loan).
2. More likely, Japan actually never does get those extra dollars.
3. Instead, I think the intent from the start is to never have those dollars sold back at all (to never have the loan repaid at all). Rather, the idea is to just have another money-from-thin-air giveaway. This bandages the bleeding for now, but only widens the wound and allows the situation continue to bleed out.

But, I dunno.
#economics #money #bitcoin