Here Comes Europe's and Japan's Debt Crisis - Just in Time for Summer

A good friend of mine, John Shippen, who works in the investment banking industry in Japan, says he totally agrees with my take on the disaster heading toward Japan that I wrote about two days ago. Please refer to: Japan's Collapse Will Be Absolute and it Cannot be Stopped - Here's Some BIG Reasons Why. The only thing about that article that John seems to take umbrage with is my description that the "disaster is heading Japan's way." John says it's the opposite. He says that the disaster isn't coming, Japan is intentionally driving into it... He describes it as, "Japan is a bug that's looking for a windshield."


Hope you got a laugh from that. It's the only one you'll get from this post. 


On that note, an easy article this morning for you referring to the huge financial calamity that is quickly heading our way (or, if you prefer, we are heading full speed ahead towards!) If you live in Japan, better put down that coffee before reading this. Hate to spill!


First a few charts from Mish Shedlock about debt in Europe - Sovereign Bond Yields Sharply Higher in Spain, Italy, Portugal:

This debt crisis has terrible repercussions for the world economy and Japan. Reuters has a good article on it entitled: Europe Poses Global Recession Threat: IMF. The article is a good rundown of the debt problem but the solutions they offer of throwing money at the problem are completely wrong (Been there, done that. Didn't work)... For proof of that, just look at how well throwing good money after bad has done for Greece.


Looks bad. These things have a way of getting out of control. But Japan is OK, right? Because these European countries can't print their way out. Japan can. Let's look at a few charts there. Here's a chart that shows the world ratio of debt to GDP:

Here's one to show Japan's debt mountain in yen:

As an important note, as of 2009, the Japanese national public debt, according to my handy-dandy calculations equaled over ¥6 million yen per man, woman and child in the country (about $72,000 USD). That means that if every single one of us coughed up ¥6 million yen and paid off our total debt today, we'd still be back in massive debt tomorrow as the costs of running the Japanese government, social security and health care, etc., etc. are completely out of control.


As of the writing of this post, Japan's national debt according to the Japanese National Debt Clock is: ¥972, 133,157,539,777 (about $11.8 trillion USD) at debt of over ¥7.5 million per person (about $91,000 USD).

To see what the debt is now, at this moment, go see the Japanese National Debt Clock here.


But wait! Things are getting better, right? Wrong! Here's an article you might want to read from a the New York Times that asks the laughable question: "Could Japan's Debt Lead to a Crisis?" (Let me ask you: "Could the next Pope be Catholic?") But, like I said, that article is a year old. I add it because it is a typical example of the confused reporting emanating out of the MSM... "Everything will be alright as long as government's keep printing money! We have to save the system!"


Well, no. We don't have to save the system. We can't save the system. The system is a wreck.


Here's a much more realistic and sober account of the mess we're in from Global Economic and Market Analysis That Matters: Debt Crisis 2012: Forget Europe, Check Out Japan: 

In addition to the current Euro crisis which we discussed here and here, Japan, the world's third largest economy, could have its own debt crisis as early as 2012 bigger than the Euro Zone.

CLICK ON CHART FOR FULL SIZE VIEW

So as long as Japan could keep financing a majority of its debt internally without going through the real test of the brutal bond market, the country most likely would not experience a debt crisis like the one currently festering in Europe.

But the chips seem to have stacked against Japan now.  On top of the new and re-financing needs, the Japanese government estimated that the economy will shrink 0.1% this fiscal year citing supply-chain disruptions from the earthquake and tsunami disaster in March, the strengthening of the yen and the European debt crisis.  Moreover, S&P said in November that Japan might be close to a downgrade.  After a sovereign debt downgrade to Aa3 by Moody's in August, 2011, it'd be hard pressed to think Japanese bond buyers would shrug off yet another credit downgrade.   

Burgeoning debt, coupled with the global and domestic economic slowdown, and continuing political turmoil (Japan has had three Prime Ministers in the last two years, and the current PM Noda’s popularity has fallen since he took office in September), would suggest it is unlikely that Japan could continue to self-contain its debt. 

I think, as I've said many times before.... The summer of 2012 is going to be a very hot one for Japan - as well as all around the world.

Japan's Financial Armageddon is Coming in 60 Days?

Is the financial Armageddon coming soon? Many people are now warning that it is inevitable. I agree. It may not be in 60 days, but I think it is coming Autumn 2011. I'm not sure, but things are lining up poorly so I think you had better get prepared. This is a warning.


People should listen to my warnings. I warned people in October of 2008 to buy gold and silver and to stock up on food (click the links for proof). At that time, gold was $724.08 an ounce (today gold is $1562.30) and silver was $9.11 an ounce (today silver stands at $47.40).


If you had taken my advice, you would have easily more than doubled your investment in gold and taken over a 520% profit on silver. It's still not too late to get into gold and silver but a price correction is coming so wait a bit.* There will be no price correction on food. Stock up now, while you can. 


*Note: A few hours after the posting of this article (check the dates and times) the price of silver dropped almost 10%.


After the big Tohoku earthquake and tsunami, when the stores shelves were bare for a week or so (and no one knew at the time how things were going to turn out on the food and water situation) my family was fine; we had 6 months of food and water, enough for 5 people, stocked up and ready to go. When people panicked and ran away from Tokyo or when they were fighting for parking spaces at the local grocery store, or fighting for bottles of water, I only watched and shook my head in disbelief.


How can people be so gullible and foolish? How can people be so negligent and irresponsible not to be prepared?

The repercussions of the Japan earthquake and tsunami followed by the nuclear accident has created shock waves throughout the world. Throw that on top of the soon-to-come collapse of the Euro...

Either preceded or followed by the collapse of the US dollar.... 

A lot of people predicted an economic calamity after the earthquake and tsunami. But, now some are saying it didn't happen. The fact is that the earthquake and tsunami are blips on the screen in the overall picture of the world economy.... But taken together with the information contained in the videos above, and they stat to cause one to consider.


Consider the Euro zone and the US dollar - along with Japan's aging problem and public debt problems - in the context of the repercussions for the business world of the Japan disaster. For a small example of how the Japan calamity is affecting foreign nations and companies, consider the fact that Japanese cars manufacturers have closed many of their plants as they are unable to obtain parts. 


On initial inspection, this doesn't seem to be such a problem. But these plants, and including Japanese plants in the USA, employ tens of thousands of people. Now, what about the satellite businesses that deal with cars? The list is long, but here's two easy ones; Tire makers or service stands? What about other businesses that cater to auto worker employees? How about them? Home manufacturers, clothes makers, shoes manufacturers, the entertainment sector, banks, credit card companies, etc., etc.? 


Now, consider the fact that nearly ever company must file their quarterly business report, well, every quarter. That means that the earthquake occurred on March 11... Let's just use March 30th as an easy calculation... This means that all of these corporations will show the effect of the Japan disaster - added to an already overloaded world economic crisis - and you just might have one more straw added to the camel's back... Could it be the straw that breaks the camel's back?


I don't think so. But throw on the extremely high probability of a Greek, Irish and Portuguese default on public debt and the ground swell rumors now abounding that Spain and Italy are next ( and are "Too big to bail") then you have a serious problem.


Let me give you fair warning again. Especially if you live in Japan: 


1) Store up enough water for at least 2 months (6 months preferable)
2) Fill your bathtub with water every night (if water stops you can use for cleaning)
3) Today or this week, buy at least 2 months of canned food (6 months preferable)
4) It is still not too late! Start saving money every month by buying gold and silver. If you have some savings, take 33% of it out of the bank and buy gold. Take the other 33% and keep it at  safe place at home.


It looks like we are headed for some really rough times. Better be prepared to stay out of the way.


If you want to find the best places to buy gold and silver, search those keywords on this blog's search function. I've warned people so many times up until now, that I'm tired of linking to it over and over.


Will people pay attention this time? If history is any guide, the answer is "No!"