When the yen briefly soared to 81 against the US dollar in early 1995 everyone spoke of it as a dollar crisis.
Now with the yen tumbling against the US dollar everyone speaks of it as a yen crisis.
The reverse is actually true. It was a yen crisis in 1995 and a dollar crisis now.
The strength of the yen in 1995 exposed weaknesses in the Japanese economy which have come home to roost. Similarly, the general strength of the US dollar against almost all currencies at the moment is exposing weaknesses in the US economy which will soon come home to roost as well.
The three charts below tell some of the story. The first chart shows that private personal savings in the US are plunging so fast as almost to disprove Galileo's famous demonstration that a big cannonball drops as fast as a small one. Nothing could fall as fast as this big one.
One reason it is happening is that, lulled by the financial hubris which now afflicts the country, almost everyone in the US seems to be realising at least some profit on their investments and using the money to buy cars, homes, stereos and other forms of consumer goods.
And because the US is no longer the world's big producer of consumer rubbish, this means buying it from abroad. As a result the only thing to challenge the plunge in US personal savings is the growth of the trade deficit. As the second chart shows, it now runs at more than US$21 billion a month and has grown this year at a speed rarely, if ever, seen before.
