November 13, 2007 (LPAC)--Behind the reports today of Japanese Prime Minister Yaseo Fukuda's alarmed warning that "the yen is rising too fast," is the threat that the dollar collapse will soon cause inflationary blowouts in Asian economies hooked on exporting goods to the United States.

Financial press are reporting that Fukuda threatened "speculators" with a big intervention by the Bank of Japan to try to push the dollar back up before its decline accelerated and becomes irreversible. Such intervention by the BoJ may in fact already be underway; certainly other Asian central banks are doing so.

An analysis in today's Financial Times by a senior Barclay's Bank economist, Tim Bond, says that the Federal Reserve is in an impossible bind. On one hand, "U.S. monetary easing [that is, the Fed's two emergency rate cuts in the last two months] is provoking an almost immediate acceleration in inflation" worldwide. The reason, Bond notes, is that the dollar's fall is so steep already, that Asian (and Ibero-American) central banks are having to keep their interest rates low, or lower them, and to print more of their own currencies in order to buy dollars and slow down the dollar drop: The net effect, is that the inflation the Fed is creating is pumped directly into those Asian economies, forming speculative bubbles on top of their export growth. So the Fed is threatening these economies with the same super-bubble collapse which has already hit the U.S., Britain, Spain, etc.

But, says Bond, the Fed is under tremendous pressure to do more of the same, because of the credit collapse and bank crisis. So it is pulled hard, in opposite directions, simultaneously.

Bloomberg reports that central banks in Colombia, India, and Korea have already tried to create barriers to dollar investments in their countries, because the dollar is falling so fast.