As you can tell, I'm a finance/global economics junkie, so while you are all playing Candy Crush'em and Bejewelled, I'm studying the markets and reading up on any juicy nuggets that I can get my hands on. Of course, I do this and then I blog only when the kids are in bed, lest I be labeled an absentee parent.
Anywho, back in January, one of the alternative media programs that I listen to nightly (not Alex Jones in this case) had a guest who was considered a 'financial insider' - a former commodities trader in the Emerging Markets/AsiaPac region, an investment banker with Royal Bank of Scotland, who also happens to be an economist. So he knows his stuff and he is well connected. I listened to the January 11th clip (name of the show is the 'Hagmann & Hagmann Report'...ok here's the link you lazy bastard...........http://www.youtube.com/watch?v=_Kn94kTs8FQ), and he brought up the one area that will be the domino setting off a global collapse - Japan. At the time, I didn't know what the hell he was talking about. Japan had been pioneers of money-pumping (Quantitative Easing/QE) during the 90's/'00's, and while they hadn't imploded, they have been pretty stagnant for the better part of twenty years. So why would they start a domino effect when the Eurozone was in such peril and the US is up to its eyes in debt?
Real easy answer - Japan launched the opening salvo of a fast-paced currency war. A race to the bottom through competitive devaluation of its currency. Cheaper currency makes for higher exports and increased attractiveness of Japanese goods and services. Unfortunately, when countries engage in 'beggar thy neighbor' currency devaluations, those that don't play the game get burned. But it looks like three can play at this game - the Euro stays on life support through the ESM (European Stability Mechanism launched two weeks after QE3 in the US - not a printing press, but a 'banking welfare' for those in need, so basically every country in the Eurozone, to the tune of over 500 billion euros). The US dollar continues to stay afloat through $85 billion of new Federal Reserve injections each month, indefinitely, although outgoing Fed Chairman Ben Bernanke has indicated 'they might begin to consider the prospect of potentially thinking about the ability to maybe initiate a gradual tapering of the money printing if the job market doesn't grow at a pace that might be considered stable in the long run'. Whatever the hell that means. I interpret that as 'QE ends in December, as does the bull market in stocks'. Dow tops at 16k, people rejoice, get boners, and shit hits the fan but the boner doesn't subside for some strange reason.
These three currencies are competing to become the lesser of all evils. I think Japan is falling on the sword (committing Harry Carey? Hari Kari? What's the one where you disembowel yourself? Sooo wish Dice-K did this during his Red Sox tenure after a 4 inning, 8 BB, 14 ER, 1 SO, 6 HBP outing, which was 'ever other game') on this one and committing national suicide by announcing the biggest economics experiment in history - dubbed 'Abenomics' after current Prime Minister Shinzo Abe. It is a ballsy injection of monetary stimulus, government spending, and structural improvements to the Japanese economy. 270 trillion yen ($2.64 trillion) in qualitative/quantitative easing. It has been widely cheered by the financial community. The Nikkei index is up 32% since January and 62% since May 2012. Bank of Japan claims that inflation is held in check at 2%. The USD has gained purchasing power against the Yen over the past six months (ie - the US dollar buys more yen, as desired as part of this currency war. Currently each dollar buys 102 yen). Liberal economist/media darling Paul Krugman is even on record saying this all reflects increased confidence in the Japan recovery. If he were the captain of the Titanic, he would have thought the glacier was a false alarm too, and if we threw enough money at it, the money would have melted the glacier and the ship would not have crashed. But there are cracks that are starting to appear in the new economic model - namely, the Japanese bond market.
For starters, interest rates in Japan have been at 0% for the better part of a decade. This ZIRP policy will cause large-scale fallout when interest rates go up (estimates of about 25% of Japanese tax revenues will go straight to interest on the debt). The only problem is, about 80% of Japan's investors are its own people. The yen is not like the dollar or euro where there is a wider market of interested parties that rely on it. How will that be managed? Will the people be screwed over in the process with a less than desirable interest rate policy for the next few decades while Japan gets its act together (year 23 now, I doubt its going to happen). From a bond market perspective, when bond prices drop, yield to maturity goes up. Higher interest payments. As the Nikkei goes through the stratosphere, the bond market has suffered several catastrophic plunges and experienced extreme volatility in recent weeks (since the April 13th QE/Spending Spree/'Abenomics' announcement). There have been five times in the past month where the Japanese bond market's circuit breakers were triggered and trading was downright HALTED because of the severe dips!!!! That's unheard of since the 2008 Financial Crisis on Wall Street. Why isn't this being talked about in WSJ, Bloomberg, and the financial cable shows?
Last week, Bank of Japan chair Haruhiko Kuroda basically issued the stand-by panic statement - "Everybody chill the fuck out, we got this." The Japanese bond market is in a freefall right now, and they have no clue how to stop it. Side note - whenever a government official tells you to calm down and relax, run for the hills. I bet the people in the WTC Towers who were told to 'stay calm and don't move' wish they listened to their gut feeling. Well the gut feeling of anyone with an ounce of common sense and two ounces of disdain for central bank intervention should be 'Get out now - this thing is gonna blow!!!!!' It's gotten to the point where the Bank of Japan has had to step in and start purchasing 70% of newly issued bonds to quell the volatility. Increased yields means higher payouts and higher corporate prime interest rates for the most indebted place on earth. This will not end well. Hmmm where have we heard this before? Investors selling treasuries and government stepping in to save the day? Bill Gross of PIMCO (world's largest bond fund) and prescient hedge fund manager Kyle Bass are both predicting a Yen and the Japanese Government Bonds market imminent COLLAPSE. How many trillion yen injections are these clowns (and I use that respectfully, as they are smarter than me, just like all of the Goldman Sachs cronies running the shadow banking system across the world that's work wonderfully since 2006) going to do everytime they have a bad day at the office?
The implications of this madness will be felt throughout the world. Like a snowdrift, all of the investors will eventually leave the yen, move to the euro and ultimately pile into the dollar as a last resort. The euro is about as stable as Amanda Bynes right now, and low/behold, Spain and Greece are starting to ask for more money since they magically aren't able to pay the bills. Didn't see that one coming a year ago. Oh wait, we did. 25% unemployment on average in the PIIGS countries, after hundreds of billions of cash injections. Things are not getting better. J&J should develop a special Band-Aid for the Central Banks, cause that's all they're using at this point. Nobody can fix the rabbit hole we are in right now. The global economy is due for a large-scale/apocalyptic reset, and we are on the cusp of it. Brazil/Russia/India/China are already hip to this, and are hoarding up all of the gold that is mined. You'd almost think they were preparing for something bad to happen. And that they should probably work together and form a gold-backed currency that they can all benefit from. Keep moving along, nothing to see people.
Japan's demise will have very big implications for an already phony US economy. Japan is our third biggest investor of US treasuries, so when we lose them, we are pretty much screwed. China (our second biggest investor), has stopped buying our 10-year bonds and treasuries at this point and will soon be liquidating their dollar holdings in favor of thousands and thousands of tons of gold. We're like that college chick with herpes, gonorrhea and syphilis, but she's still hot so you at least hang out with her in a strictly platonic fashion. This also is an indictment of excessive QE, which we are so far down the path on, that, like a junkie, we will go through withdrawals the second it slows. Inflation will eventually catch up to it on average 2-3 years down the road of the initial easing, credit rating downgrades will follow, and central banks are cornered to the point where all they can do is raise the interest rate on the debt to keep the investors moderately happy, which means more tax revenues go to paying for a non-value-added expense. This will hurt the US more than Japan, because the Fed owns most of our debt, as opposed to the enslaved citizen of Japan, who can't really 'demand' anything from Bank of Japan.
So as mentioned before, here is the order of operations - Japan collapse --> Euro collapse --> US collapse --> BRICS rise from the ashes with a gold-backed yuan or............the dreaded one world currency that the globalists/Illuminati have been waiting for since time immemorial. In fact, it will be called the Phoenix, and it will 'rise' in 2018:
Scared yet? Couple that with nuclear war in the middle east, the chipping away at the 2nd amendment, 2 billion plus in DHS bullet purchases, the falling dollar/countries exiting the petrodollar, food shortages, gold hoarding, no more central bank magic bullets, and suddenly this shit all makes sense. The US will not be substantial part of the post-collapse world. Too much debt, gutted military, horrible reputation worldwide, and our only true allies Israel and UK will want nothing to do with us because we didn't help them when they needed it. Sorry this stuff sounds scary, but remember how you felt in September 2008 as the shit hit the fan? Just trying to wake you people up. Don't shoot the messenger.
BTW - big week in the global economy front. The Bilderberger Group meets in Hertfordshire, England on June 6-9. If you don't know who the Bilderbergers are, they are only the most powerful hundred people in the world who basically draw up the global agenda for the year. They also 'don't exist', 'only produce good ideas', 'care about us', and again, 'don't exist'. Subject of another post. But some big takeaways on Syria, Japan, Iran, and the US economy will come out of this event. Stay tuned.