In the heat of the financial battle, perceptions and priorities become too easily skewed. Exhibit one, in support of this assertion, is the handwringing of the Group of Seven over the appreciation of the yen, which is perceived to be a new threat to financial stability.

The logic here is surely upside down. The yen has been undervalued for years and the undervaluation has been exacerbated by the activity of carry traders who borrow in the cheap, low-interest Japanese currency (or the derivative market equivalent) to invest in higher-yielding currencies such as the Australian or New Zealand dollar.