The coming currency war between Asia and the West can drag the world stock markets to its knees
Joe Weinman
Nov. 19, 2006

Something interest in happening behind the scene. The US automakers met with President Bush to express their frustration over artificially lowered Japanese currency Yen. That hurts the American car manufacturers. At the same time Bank of Japan refused to raise the rates in spite of the best economic growth news in decades.

China is dragging its feet on Yuan for along time. India is also no exception. Indian outsourcing will collapse in seconds if the Dollar Rupee parity is reached. Chinese President is in India this week to join hands to fight the western nations on the trade and monetary policy issues. Japan will soon face some actions from the Democrats and Republicans in America to hike up its yen.

The biggest threat to Asian trade surplus comes from some other direction. As US Housing markets continue to collapse, the US consumers will shrink the buying habit. That will create a sense in Japan, China and India that Americans are not needed any more. The Asian economies will stop talking about hiking the currency any further.

At that stage a global trade and currency war will become overt. Right now it is covert. That is the ideal recipe for global depression. US will be least affected because it in cooperation with Canada is the most self-sufficient country. But other economies like China, Japan and India will suffer big time. The world stock market can suffer 40 to 70% from its current levels.

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