Whilst bets on a September US rate hike are now down to 30%, that is still nearly a third of the market betting it will happen despite the realities we describe on the US economy and the world in which is belongs. Recently Zero Hedge hypothesised why the Fed may be in a hurry to do so despite their economy still limping. It’s worth repeating [we’ve added explanations for newer readers]: “When considering that by 2018 the BOJ [Bank of Japan] market will have become the world's most illiquid (as the BOJ will hold 60% or more of all issues), the IMF's final warning is that "such a change in market conditions could trigger the potential for abrupt jumps in yields." At that moment the BOJ will finally lose control. In other words, the long-overdue Kyle Bass scenario will finally take place in about 2-3 years, tops. But ignoring the endgame for Japan, and recall that BofA [Bank of America] triangulated just this when it said that "the BOJ is basically declaring that Japan will need to fix its long-term problems by 2018, or risk becoming a failed nation", what's worse for [Prime Minister] Abe is that the countdown until his program loses all credibility has begun. What happens then? As BNP [French bank BNP Paribas] wrote in an August 28-dated report, "Once foreign investors lose faith in Abenomics, foreign outflows are likely to trigger a Japanese equities meltdown similar to the one observed during 2007-09." And from there, the contagion will spread to the entire world, whose central banks incidentally, will be faced with precisely the same question: who will be responsible for the next round of monetization and desperately kicking the can one more time. But before we get to the QE endgame, we first need to get the interim point: the one where first the markets and then the media realizes that the BOJ - the one central banks whose bank monetization is keeping the world's asset levels afloat now that the ECB has admitted it is having "problems" finding sellers - will have no choice but to taper, with all the associated downstream effects on domestic and global asset prices. It's all downhill from there, and not just for Japan but all other "safe collateral" monetizing central banks, which explains the real reason the Fed is in a rush to hike: so it can at least engage in some more QE when every other central bank fails” This is a great commentary not just on why we may see a rate rise but more broadly the flawed nature of long term central bank market intervention to the extent we’ve seen. Further to yesterday’s article, no wonder people are keeping their gold closer to hand on COMEX….
Focus on this FACT -- there is NO way Japan can fix their problem, in the same sense there is NO way the U.S. can pay off its debts. Plus Japan has demographics working against it -- an explosion in the number of retirees no longer paying high taxes to the government, but consuming essentially the same services. If and when Japan repudiates its debts, "game over!" The detail I don't understand, and no one has explained satisfactorily, globally, who is all this debt owed to? Who's the winner (at least on paper; they aren't going to collect)? Who'll be hurt the most by the massive reset? It's inevitable. ========== Meant to add, talk about suckers -- I would no more "own" paper gold on COMEX than I would fly.
This is hogwash. Abe's policies have caused great inflation over the last three years, but that's hardly enough to say Japan has failed as a nation. The JPY:USD exchange rate under Abe currently is basically the same as it was under Abe before he resigned in 2007. The strength in the Yen from 2008-2012 was almost entirely the result of weak dollar policies implemented by the US during that time frame. Unlike the Japanese economic/corporate restructuring cited in the first post in the thread, many Japanese executives formed their own international corporations to diversify their holdings. These individuals, whose receivables currently are in JPY, will eventually restructure their contracts to be receivable in USD or RMB. The drop in demand for yen, on a regional basis, will result in the BOJ policy naturally following a path similar to what Abe has structured. JPY:USD exchange rates will drive Japanese corporations to reinvest in Japanese manufacturing and infrastructure. Facilities that are currently in Malaysia, Thailand, Philippines, etc will potentially be relocated back to Japan. The "end game" as it goes will lead to less globalized multi-national corporations, as companies and countries look more toward regional profits. Japan, if they want to take advantage of the current global economy, would start acquiring oil and natural gas at low prices. Yes, the commodities might see sustained low prices for a decade or thereabout, but that's nothing when talking about economic timeframes.
Your last paragraph is a key point. Japan is the only major economic power that has virtually no natural energy resources, and thus you saw a proliferation of nuclear plants 20 to 40 years ago. They could have been the leader in nuclear innovation.
