Now, after yesterday's report that the main market analyst at China's Caixin Market News and Analysis reports that he is convinced of a 40% devaluation of the Japanese yen is imminent and inevitable, here comes another report hot on the heels from the United States.
Market Watch reports in: The Yen's Looming Day of Reckoning
Japan is on an unsustainable path of a strong yen and deflation. The unprofitability of Japan's major exporters and emerging trade deficits suggest that the end of this path is in sight. The transition from a strong to weak yen will likely be abrupt, involving a sudden and big devaluation of 30% to 40%.
It will be a big shock to Japan's neighbors and its distant competitors like Germany. The yen's devaluation in 1996 was a main factor in triggering the Asian Financial Crisis. Japan's neighbors must have a strong banking system to withstand a bigger devaluation of the yen.Japan's nominal gross domestic product contracted 8% in the four years to the third quarter of 2011, and six percentage points of that was due to deflation. Without increased government expenditure, the contraction will be one percentage point more. Japan has not seen this kind of sustained deflation since the 1930s.
Without government deficits, Japan's economy will decline much more. Central government bonds and borrowings plus its guaranteed debts rose by 116.3 trillion yen ($1.4 trillion) during the period, equivalent to one-fourth of the level of the nominal GDP in the third quarter of 2011. If Japan had adopted balanced budgets, its economy would have contracted two to three times more. This will lead to a debt crisis in its private sector.
If you are living in Japan then it is time right now to get your house in order.Without government deficits, Japan's economy will decline much more. Central government bonds and borrowings plus its guaranteed debts rose by 116.3 trillion yen ($1.4 trillion) during the period, equivalent to one-fourth of the level of the nominal GDP in the third quarter of 2011. If Japan had adopted balanced budgets, its economy would have contracted two to three times more. This will lead to a debt crisis in its private sector.
1) Stop using credit cards
2) Get out of debt
3) Store up at least three months (six months preferably) of food and water to get over the coming financial shock
4) Protect your wealth by obtaining physical gold and silver
These warnings about Japan's collapse have been coming louder and louder and more often over these past two months. The crash that was predicted by Karl Bass and reported here in Debt in Japan Actually 492% of GDP! UK 497% of GDP!:
...People going along, as usual, in their ignorant bliss. The "leaders" knowing full well what's going on but trying to get out with what they can, while they can! The only difference between the sinking ship and the economy is there won't be any rescue coming for us.
While the entire world watches Greece and Italy, it seems, from looking at this chart, the real action is the UK, Japan, Spain and France.
Business, government and household debt in Japan show a 492% of GDP problem for Japan. The tax and spend days are coming to an end soon in Europe, the USA and, of course, in Japan.
This entire house of cards is going to collapse around our heads. When the collapse does come, it will come suddenly. Hope you have cash readily available and at least a few weeks of food and water ready. Because when the crash does come, stores will be empty in a matter if a few hours - if it takes that long.
You've read it on this blog and I seriously warn people to get ready... This could break any day now considering the still simmering situation in Greece, the worsening situation in Spain, Portugal and Italy, tensions and saber-rattling by the USA and Israel against Iran... And now more problems with a world wide move away from the US dollar.
May you live in interesting times.... Indeed.
6 comments:
A 40% devaluation puts the Yen right back where it was 3 or 4 years ago, I believe. So this sort of move is not out of the question at all.
However, if the Yen is to be devalued 40%, then it makes no sense to get out of Yen denominated debt. To the contrary, you should borrow as much Yen as you need, but convert the borrowed money into dollars or gold or some other stronger currency. It will become much cheaper to then pay back the borrowed money after any devaluation.
If the people predicting the devaluation are correct, borrowers will be able to profit as a result of the devaluation.
Andy "In Japan" wrote, "you should borrow as much Yen as you need, but convert the borrowed money into dollars or gold or some other stronger currency. It will become much cheaper to then pay back the borrowed money after any devaluation."
I've been mulling over a Gary North article lately, your comment reminded me of this bit:
"Debtors who learn how to play the pyramiding game in the boom phase generally go bankrupt after the monetary stabilization takes place."
http://www.lewrockwell.com/north/north600.html
It's a really intense article about money, history and crack-up-booms, perhaps it's relevant here?
- clark
It's simple math. A Yen devaluation will help people and institutions who borrow Yen, and hurt people who save Yen.
The government in Japan borrows an outrageous amount of money so they have an incentive to arrange for a devaluation by their co-conspirators at the Bank of Japan.
I said nothing about using leverage or pyramiding, so the sage warning provided by Gary North is not particularly relevant, especially since it seems as if monetary stabilization is never in the cards.
So Mike, what do you suggest for folks like myself who are looking to get out of loonybin that the U.S. is becoming and who happen to really like Japan on a cultural level?
I said I was just reminded of the article, Andy. Nothing more.
Andy "In Japan" wrote, "it seems as if monetary stabilization is never in the cards."
Never say never. All kinds of black swans fly today.
The big key to paying back any debt is having a means to do so.
Without a means to pay back the loan, you're in the same boat as those who are leveraged to the max.
Also, isn't all debt based on a fiat system part of a pyramid scheme?
Insert image of farmers who lost it all due to un-payable debts during the Great Depression, in the dust bowl, and during the 1980's farm crisis, here x.
- clark
RE: taking out a loan.
It could work out fine I suppose, or...
In some countries facing economic troubles such as Greece and Argentina there's been times where individuals are limited as to how much money they can withdraw at a time. It's not impossible that could happen in Japan too.
If you had $400 monthly payments to make and could only take out $200 per month, you'd be S.O.L.
Even if you had a foreign bank account that might not do any good?
You might say, well, I'll sell my gold to make the payments. There might be limitations there too? Or perhaps due to say, riots, the places to sell gold might be momentarily closed?
The value of social networks might shine about then?
Who knows? Black swan landing?
YMMV. ?
- clark
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