Japan is the world’s third largest economy and a key trading partner to all of the large powers with a current “debt versus the country’s GDP” at 230% – the highest in the developed world. And if you add in corporate and private debt, total Japanese debt equates to more like 500% of GDP.
Think about that for a moment.
Any given year the country of Japan “owes” (lets average it out) 3X the amount of money that it currently “makes”. That’s what I call a serious credit card limit – totally maxed.
To illustrate just how fragile this situation is ( and possibly foreshadow a likely “similar” situation currently developing in the U.S ) if the base interest rates in Japan where to rise to a piddly 2% ( as the current rate is at 0.1% ) it would have “interest expense on government debt” equate to 80% of government revenue. That’s 80% of the countries GDP ( essentially ) going to pay the INTEREST on outstanding debt alone!
This “tiny jump” in interest rates would cause complete chaos in the bond market, be absolutely impossible to service, and likely lead to full-blown economic crisis.
So what’s the plan in Japan? Seeing that even the current stimulus plan ( 3X as large as th U.S current QE) is “barely” allowing them to hang on? More printing? More government bond purchases?
And of course when all else fails….what’s another great way a government can increase its revenue?
Raise taxes, and essentially make the people “work off the debt”.
Sound at all familiar?
Slaves to the bank. That’s what I see.
The “short Aussie” “post and subsequent trades of the last 24 hours have been spectacular as “indeed” the Australian Dollar took some serious damage overnight. Do I think it’s done? No way….The Aussie’s got a ways further to fall.
YUP!
Kong –
When interest rates do rise.. how does a country like Japan even begin to make those interest payments? Taxes will be sky high, consumption of all but rice and (soy) beans will end.. Do they try to print out of it and totally collapse their currency? Do they accept their fate as debt slaves for the next 100 years?
Also – what’s the effect of China yesterday saying that their $3.66T in foreign reserves in enough for them, with a 2015 float of the yuan planned? Is this the moment all of us at ForexKong have been depressingly looking forward to? Need your help on the logistics of how these events play out. Seems to be like Tokyo and all of the US is about to look like Detroit.
Thanks, Galt
(P.S. US Senate hearings regarding bitcoin were shockingly positive. There are no obstacles in sight for bitcoin advancement.)
Japan will continue to print / bond buy to a degree we really won’t be able to phathom – yes.
You can see through this example how “close to the line” Japan already is. It’s “print or die” on a scale even larger than the U.S.
This should help people better understand the “print to eternity” concept Central Banks are undertaking as “if everyone prints / devalues together” the books “may” all stay within some measure of balance.
Now – Japan is a little different in that – the majority of thier gov debt is held “domestically”. They can print freely and handle the ramifications “locally” where as the U.S situation is much more dire – owing such large amounts “sovereignly”.
Big news out of China yes – large scale implications yes. The Chinese are openly letting markets know they are about done “backstopping” the U.S with their “usual purchases of U.S debt” and as well are “actively” reducing their USD reserves ( converting to gold etc… ) so yes…..
The noose is tightening ……and “not so slowly / softly” anymore!
I’m looking into funds / means to purchase / invest in Yuan as we speak.
I need to elaborate on all if this …but am out the door now.
The U.S is in the exact same position as Japan with respect to the fragility of it’s “ponzi house of cards” only worse in that….
Japan can / will print forever having the majority of it’s debt held by it’s own people, and the people of Japan will continue to “absorb” this as they have for some 10 years already.
It’s The U.S’s “sovereign debt” that’s the problem as……if Ben stopped buying them…NO ONE ELSE IS!
So what happens? The interest rates rise….then rise, and the debt load becomes unsustainable ( as the U.S is already broke so…. ) every single “uptick” in the yields on U.S bonds is like a dagger in the heart…or another “pin prick in the U.S wallet”.
Short of some kind of “revolutionary industry” suddenly popping up to spur actual “real growth” as we saw with the Industrial Revolution, The Internet etc…. the path is pretty clear.
Print until you can’t print anymore “praying you’ll make it til then”. Or war of course.
Wars are great for Central Bankers as they get to “print and lend” – but do it to “save the nation”!….as well – the U.S is pretty good at finding excuses to do that.
My take is that at some point ( relatively soon ) the U.S will default / find a reason “not to pay out on it’s debt obligations” but find a reason that will then be justified by war.
China and Russia are now clearly squashing the Petro Dollar, and soon Oil will be priced in Yuan on the Shenghai exchange so…..there is a lot happen right now.
Kong, thanks very much for that thorough run through. This appears to be game time, indeed.
God help the millions that don’t see what’s headed their way.
If you find a way to buy into the yuan through a normal brokerage account, please do share. On a separate note, my local gold merchant has seen unprecented interest in selling physical PMs and cannot keep gold stocked. The funny part about it is that the prices keep dropping electronically, so he’s now not even restocking, since he’s not even making his spreads anymore due to the time of purchase/delivery.
Galt
It’s kinda like that “frog in boiling water” analogy goes as…I don’t think people even realize the heat has been turning higher for years already!
I envision an average working class guy my age…maybe 2 kids, wife out of work, house value cut in half with a mortgage they cant really afford.
Sounds pretty normal as I understand it. Totally stressed. Totally freaked . Totally hooped.
Then he get’s canned. Sounds pretty normal as I understand it.
If they’ve got a credit card, or some how find a way to “borrow” – boom! case closed!
He gets up every morning from that day on – going to work for the bank.
Slavery. Thanks to The U.S Federal Reserve and the U.S Government. Exactly as planned.
Slavery – so true.
It’s funny how people are so eager to ignore history. What civilization throughout history hasn’t eventually been run by a small oligarchy and a huge slave base to support their power. Just like every other technology in the world, the technology to enslave populations has evolved, too. What could be more organized and efficient that the Fed’s modern day slavery plan. It’s brilliant and awesome in a totally sinister way.
And if I were at the top of the heap.. well, I’d do the exact same thing. If the masses don’t show any signs of being sentient life forms, why treat them as anything but slaves? The only remaining question in my mind is what to do with the all the unemployed, unskilled humans once their simple labors can be totally replaced by computer programs? For how long do the oligarchs keep them on life support before letting them die off?
Would love to hear your take on what happens to the increasing “dead weight” of this world, as per capita natural resource availabilities decline.
As my longest standing ( and most dear ) position is “short humanity and long interplanetary travel” you can imagine where I stand.
There will always be a need for “hands on labor” no matter how advanced, we’ll still need “some humans” to push the odd button er two.
Sadly, I find it very hard to imagine “help thy neighbor” being a particularily popular concept moving forward, as those unable to “survive” will become less and less of a concern. Not to get all “out there ” but I’ve even heard / read rumblings of mass “sterilization programs” ( please google “BILL GATES AND EUGENICS” if that’s not bizarre enough ) being thrown around.
As well consider that when biotechnologies do break out, and we “do find ways to extend human life” ( which we already know of / please google “resveratrol” for some ideas ) these technologies will likely be reserved for the “super rich” no doubt.
My take….( as I am currently building my own spaceship to get back home ) – there is a tiny little table in some back room, of some little office in some little hidden place, behind a door, 500 feet below the surface of the Earth – where sit a small group of wealthy individuals ( and perhaps a couple from my home planet ) working away as quickly / readily as they can….
To “get the f#%K out of here” as soon as possible.
long baby…….interplanetary space travel. short those humans.
Going to add a bit of gold today. Looks like half decent point for an add if this falling wedge reversal plays out. We know the fundamentals are there.
USD completely creamed here today along side the commods as suggested some time ago.
USD being sold “along side risk” as stock prices continue to “astound”. Hilairous.
Every single thing on my screen is beet red short of this one tiny little blinking light ……”SP Futures” – still green.
To date….I’ve never seen anything this comical / ridiculous. STILL playing out!
Adding to gold…..lookin good to me.
Hi kong.. as i said last week it is pure madness to try short equities indices with the pomo this week..seeing ur smart money chart it is obvious that the buyers are the fed only with vol confirming it.. lower n lower vol each day..guesd spx will never be correct again with the mass media also putting out mkts are too high notices.
Oh Robert……
Yes the main stream media is looking to “save a little face” here these days as….even they can’t continue looking into the camera / reading their lines these days – and in turn get a decent nights sleep.
It’s past any level of “good conscience”……even for the flaoting heads.
Of interest though Robert……the SP gained what “4 points on the week”? ( 1799.00 on Monday as I see it ) for a total cost of aprox 15 billion tax payers dollars on the week?
The SP 500 fluxuates that much in a given hour so………
The Fed’s “influence” wanes daily……..as the U.S tax payer takes another kick in the ribs.
Kong – your perspectives are a breath of fresh air. It’s a rare thing for a guy to be willing to sound crazy, justified only by his reason and ability to predict future events. I like it.
In terms of galactic space travel.. my favorite billionaire, Sir Richard Branson, announced today that Virgin Galactic now accepts bitcoin for travel into space. ~350BTC to be an instant astronaut. You will see me in space soon – look for “John Galt” as the 1000th person in space. (I’ll let another 500 people test out that space ship before I try it.)
Yes I’ve followed “scaled composites” the company that developed “spaceship one” long before Branson went partners / bought into them.
Burt Rutan – it’s his vision and his baby….but Richie’s got the bucks and the “commerical vision”.
I’m in line for a ticket as well John – perhaps we can touch base “pre flight”, and check into seating.
I like the window.
Forex is a hobby as space is my true passion.
Isn’t it every kids?
Terrific. It’d be great to meet you some day.
The only bad part is that they don’t serve food and they’ll make us all come back to Earth after the two hour flight.
Sit on the S&P – that’s headed that way.