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The Monetary Illusion Again in Trade

March 8, 2015

The Monetary Illusion Again in Trade

Just as a follow-up to further highlight and emphasize the “monetary illusion” of currency devaluation in this closed environment, the yen’s returned devaluation against the “dollar” more recently has renewed confusion (or intentional misdirection) about what Abenomics is supposedly accomplishing. Taken solely from the perspective of the Japanese internally, exports to the US are once more growing, and doing so rather sharply. December’s year-over-year gain, in yen, was almost 24% while January came in at an equally robust 16.5%.

Taken by themselves without context, it would seem great fortune and monetary capability to gain in exports at such huge growth rates. But, as I have shown time and again, what goes out of Japan is matched by what comes in to the US. For all that buzz over huge export growth, nothing much shows up on this end.

ABOOK March 2015 Illusion Japan US Latest

Both months were positive in “dollars” but barely and thus no actual growth took place. Economists and central bankers even concede the disparity, but don’t much care about it. They simply assume that Japanese exporters now flush with more yen will hire more workers and pay the ones they have even more, igniting that virtuous circle of “aggregate demand.” In reality, why would they do that?

 

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