SOS QE Japan vs USA

1. 2001-2006 Japan turn on QE, it did not lead to liquidity in the country but just boosted the carry trade.
2. Today, USA is doing the same, it only boost carry trade to higher yielding assets elsewhere.
3. Japan to Sept 2010 flow of USD46bil from developed to emerging markets (2009: USD9bil only)
4. Property Bubble? Household debt to total income Australia (159%) UK peaked 174% but now 160%, USA peak at 138%, now 128%.
   
5. Policy responses to QE:
   1. allow currency to appreciate (export may suffer). 2. keep exchange rate more or less fixed and let the money flow in and try to sterilise the consequence, like China is doing (raises reserve or issues sterilisation bills to mop up US liquidity). 3. some kind of tax or capital control like Thailand and Brazil
   
6. the lesson from the crisis is LEVERAGE.

MyView

QE will boost carry trade. 2001 to 2006, Japan did it, 2009-2010 USA is doing it. Yen peaked in 1998 at Y146, Nov 2010 is about Y80 per US dollar (but in between it zig zag). Japan bubble peaked in 1989, until today, the market still in "doldrums". What will happen to US dollar?