April 19, 2008

From late afternoon on Sunday to late afternoon on Friday, international financial markets and the stream of information that feeds it never take a breather. There is only one holiday observed in every country, January 1st. In 1989, the Bank of Japan under newly installed Governor Mieno raised benchmark interest rates on Christmas Day. Investors understood the no-nonsense signal of that action, and the Nikkei peaked at 38,916 within a week. The rest is history. Mieno overplayed his hand, and the Japanese economy paid dearly.

Weekends offer a chance for international economists and the investing community to catch its breath — sometimes. Political news is often made on weekends. There are elections and many opportunities for elected officials to voice opinions or announce startling policy initiatives. The Fed’s adoption of money supply targeting in October 1979 was announced on a weekend. August 15, 1971, when President Nixon severed the dollar’s link to gold, fell on a Sunday. On another Sunday, September 20, 1992, French voters accepted the Maastricht Treaty by a razor-thin margin. If a few votes went the other way and the referendum had not passed, plans for a common European currency would have died perhaps for a generation or longer. But on weekends, at least there is not a steady, heavy stream of new data and market activity, and that is a welcome respite.


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