It must be stressed that economies are suffering severe stress in many countries worldwide. Russia's fragile economy is again contracting. If the IMF starts lending in late summer, some of these outstanding obligations might be paid. Otherwise, we could be looking at a government default, and currency devaluation that could collapse the already unsteady Russian government, banking sector, and economy. Although the Korea's economy only began contracting in the first quarter of this year, the Korean Central Bank is expecting a sharp contraction in the third quarter.
Most Asian counties face similarly grim scenario.
We are now witnessing world financial markets and currency movements that have been disconnected from and are inconsistent with economic fundamentals. This is because currencies are an imaginary creation of governments and banks. As governments and banks move closer to insolvency, the value of currencies must fall. The interplay between the U.S. dollar and the Japanese Yen is a great illustration. Japan has a large trade surplus and is a capital surplus country.