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.