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Second-Order Effects

Posted by: Justin Bachman on October 25, 2011

By Tom Keene

Matt McCollister, a vice president at central Ohio’s economic development panel, Columbus2020, said the strong yen came up often in meetings with Japanese executives as a solid incentive for overseas investment. He visited Japan recently to woo more investment to the state.

Yuri Kageyama, the AP, 5 Oct 2011

Poor Honda, poor Toyota. The spin will be on Japan dying because of a strong Yen. (Strong Yen means marginally weaker Japanese exports. Nominal GDP and, ambiguously price, descend.)

It also suggests a media-clueless, second-order (second-round?) effect.

Tokyo will “buy” Asia and the United States of-a-Weak-Dollar-is-in-Our-Best-Lazy-Ass-Interest.

Jens Nordvig, of Nomura, has this nailed. Sara Eisen has this nailed. (See, Ms. Eisen at Bloomberg Radio+, all this at a theater near you.)

Yen-Won is out near we-are-South-Korea-and-you’re-not… deuce-standard deviations. Trade-weighted Yen is about five-deviations wide. Swiss trade-weighted was eightish-deviations wide before they screamed, “Onkel!”

I will launch charts of first-order distortion on Radio+ (@ AppStore) and on Surveillance Midday. You should launch awareness of what developed-country irresponsibility brings at a lesser-order effect.

It, they, with a capital T, bring the obvious, BUT, applied surreptitiously at the deuce order. They confront stupid-wide Greece & stupid-strong CHF & crushing-strong JPY. Consider, what you, and I can’t see. (A Grossman & Stiglitz moment of awe.)

They will buy, acquire, an aggregated Kansas. Japan, cornered, will bring to bear, second-order effects. Discuss.

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EconoChat captures Tom Keene's thoughts on economics, finance and investment. He is editor-at-large for Bloomberg News and hosts Bloomberg Surveillance and Bloomberg on the Economy on NYC1130, Sirius 129 and XM 130 and Surveillance Midday on Bloomberg Television. His complete interviews are at Tom Keene on Demand. Look for Tom on twitter @tomkeene

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