The Japanese financial system is beginning to spin wildly out if control
Via theeconomiccollapseblog.com, 27th May 2013 -
The financial system of the third largest economy on the planet is
starting to come apart at the seams, and the ripple effects are going to
be felt all over the globe. Nobody knew exactly when the Japanese
financial system was going to begin to implode, but pretty much everyone
knew that a day of reckoning for Japan was coming eventually.
After all, the Japanese economy has been in a slump for over a decade,
Japan has a debt to GDP ratio of well over 200 percent and they are
spending about 50 percent of all tax revenue on debt service. In a
desperate attempt to revitalize the economy and reduce the debt burden,
the Bank of Japan decided a few months ago to start pumping massive
amounts of money into the economy.
At first, it seemed to be working. Economic activity perked up and the
Japanese stock market went on a tremendous run. Unfortunately, there is
also a very significant downside to pumping your economy full of money.
Investors start demanding higher returns on their money and interest
rates go up. But the Japanese government cannot afford higher interest
Without super low interest rates, Japanese government finances would
totally collapse. In addition, higher interest rates in the private
sector would make it much more difficult for the Japanese economy to
expand. In essence, pretty much the last thing that Japan needs right
now is significantly higher interest rates, but that is exactly what the
policies of the Bank of Japan are going to produce.
There is a lot of fear in Japan right now. On Thursday, the Nikkei
plunged 7.3 percent. That was the largest single day decline in more
than two years. Then on Monday the index fell by another 3.2 percent.
And according to Business Insider, things are not looking good for Tuesday at this point...
In post-close futures trading, the Nikkei has dropped by another couple hundred points, and has dropped below 14,000.
Are we witnessing the beginning of a colossal financial meltdown by the
third largest economy on the planet? The Bank of Japan is starting to
lose control, and if Japan goes down hard the crisis could spread to
Europe and North America very rapidly. The following is from a recent
article by Graham Summers...
As Japan has indicated, when bonds start to plunge, it’s not good for
stocks. Today the Japanese Bond market fell and the Nikkei plunged 7%.
The entire market down 7%… despite the Bank of Japan funneling $19
billion into it to hold things together.
This is what it looks like when a Central Bank begins to lose control.
And what’s happening in Japan today will be coming to the US in the not
so distant future.
If you think the Fed is not terrified of this, think again. The Fed has
pumped over $1 trillion into foreign banks, hoping to stop the mess from
getting to the US. As Japan is showing us, the Fed will fail.
Investors, take note… the financial system is sending us major warnings…
If you are not already preparing for a potential market collapse, now is the time to be doing so.
And all of this money printing is absolutely crushing the Japanese yen.
Since the start of 2013, the yen has declined 16 percent against the
U.S. dollar, even though the U.S. dollar is also being rapidly debased.
Just check out this chart of the yen vs. the U.S. dollar. It is
The term "currency war" is something that you are going to hear a lot
more over the next few years, and what you can see in the chart above is
only the beginning.
What the Bank of Japan is doing right now is absolutely unprecedented.
It has announced that it plans to inject the equivalent of
approximately $1.4 trillion into the Japanese economy in less than two
As Kyle Bass recently discussed, that dwarfs the quantitative easing that the Federal Reserve has been doing...
"What they're doing represents 70% of what the Fed is doing here with an economy 1/3 the size of ours"
The big problem for Japan will come when government bond yields really
start to rise. The yield on 10 year government bonds has been creeping
up over the past few months, and if they hit the 1.0% mark that will set
off some major red flags.
Because Japan has a debt to GDP ratio of more than 200 percent, the only
way that it can avoid a total meltdown of government finances is to
have super low interest rates. The video posted below does a great job
of elaborating on this point...
It really is very simple. If interest rates rise substantially, Japan will be done.
Investor Kyle Bass is one of those that have been warning about this for a long time...
There's a fatalism, he says, in everyone he talks to in Japan. Their
thinking is changing, and the way they talk to him about debt is
changing. They already spend 50% of tax revenue on debt service.
"If rates go up, it's game over."
The financial problems in Cyprus and Greece are just tiny blips compared
to what a major financial crisis in Japan would potentially be like.
The Japanese economy is larger than the economies of Germany and Italy
combined. If the house of cards in Japan comes tumbling down, trillions
of dollars of investments all over the globe are going to be affected.
And what is happening right now in Japan should serve as a sober warning
to the United States. Like Japan, the money printing that the Federal
Reserve has been doing has caused economic activity to perk up a bit and
it has sent the stock market on an unprecedented run.
Unfortunately, no bubble that the Federal Reserve has ever created has
been able to last forever. At some point, we will pay a very great
price for all of the debt that the U.S. government has been accumulating
and all of the reckless money printing that the Fed has been engaged
So enjoy the calm before the storm while you still can.
It won't last for long.
- The Japanese financial system is beginning to spin wildly out if control
- Surge of buyers rush for physical Gold & Silver - Wholesalers in the US sell out of silver
- Cyber Attack on US Banks and Government Websites expected on May 7th
- More than 40 huge sinkholes open up all over Pennsylvania’s capital
- Major Ed Dames predicted Japan / USA stock market crash as Japan's economic situation leads to a Global sell off
Thanks to: http://www.transients.info