Emerging South

Yesterday Paul Krugman was on Charlie Rose; the man deserved the noble price for his analysis of trade patterns and location of economic activity. 
This weekend all Belgian newspapers are boasting "Belgium consumers don't  care for the crisis, they keep shopping".  Sometimes I wonder if the newspapers are directed by politicians to soothen us and make sure we don't have a clue of the doom which will fall over Europe and especially Belgium.
The Los Angeles Times published a list of countries and the % their stock index fell with regard to the peak:
Rusia: - 73,2%
Vietnam: -70,5%
China: -69,8%
Hong  Kong: -60,1%
Turkey: -58,3%
Egypt: -56,9%
Italy: -55,2%
South Korea: -54,5%

The Brazilian Bovespa went down 57,2% from it's top.  Take into accout that (1) more than 40% of the Bovespa is represented by Rio Vale Doce (steel) and Petrobras (oil), which are both very big buying opportunities today and (2) that the Brazilian Bovespa was one the strongest performing stock exchange for the last 3 year; which makes the 57,2% fall against peak much more relative.
And as a comparison: the Bel20 fell 59,62% against its 4750 peak; that's more than the Bovespa !

But currently the stock exchange is not worrying me most.  What worries me most is the Yen shooting up like a rocket against all currencies.  This is the only reason why stocks have been crashing last week: the Japanese carry trade is crashing because of the Yen rocketing up high. I wrote many times on "Peak Credit" the last months and this is what is ruling the planet now: the US cannot take on more debt.  But actually, they ARE taking in more debt, not to buy products made in China, Japan or Brazil, rather to fill a massive bottomless pit that the derivate beasts have digged.   Nothing is bought or created with all this money.  

And both the US and Japan keep sailing the 0% interest rate boat.  True, the US is still a little above 1% most of the time, but the will drop the rates below 1% eventually and kill the few last savers in the US.  
It is stunning that no one actually undersands what is going on.  In July I predicted the Brazilian Real to fall between 20 - 30%; in October I proved right.  On October 1st,  I wrote that the South African Rand will not raise above 0,085 against the Euro again in the coming year; I was right (and will be right).

At the same time, the central bank of Denmark is RAISING its benchmark lending rate by half a percentage point.  I believe this is the right thing to do.
I also believe South Africa should raise its interest rate to 16%, Brazil should keep its current 13,75% Selic rate and the ECB should keep it for at least another year on 4,25%.  Actually, if South Africa would drop its interest rate between now and February, the SAR would further tank to unseen dark lows.
But no, Japan will keep lending at 0%, the US will lower its intrest rate below 1%, the ECB will follow. All for the sake of trade and keep their currencies low. 

I am 100% against the exchange markets as they are today.  The entire floating currency mess is a nightmare and wrong.  It is wrong and it will eventually kill the US and Japan in the long run. 
As long as this mess is not solved, there is no way global trade can go back to normal.  The whole system of free floating currency regimes and the free trade movements need to be burried.  The attemps of corporation and nations to run this system has been a total faillure.

And this is why I admire Sarkosy so much recently (and China with him): his call for an international meeting to talk about the Bretton Woods II and the Nixon floating currency is the only way out of this huge mess we are currently in.
But they will not be able to replace the current system, unless the US first stops spending trillions on military domination, etc...  The horns of the dilemma are in the US and they will not kill the current system, they will keep it alive, kill many nations (economically) with it and we will all (also and especially Belgium) be trapped until something happens. And, unless Obama really brings change, this will only be the bankrupcy of the US government which will eventually change the world systems in a massive cascade.

Believe me: Bretton Woods II ending the current floating currency regimes and free trade movements is the only structural solution to the current crisis and the mess that's ahead of us.