- Kyle Bass: “Japan Will Implode Under Weight Of Their Debt” (ZeroHedge, April 4, 2013):
As the fast-money flabber-mouths stare admiringly at the rise in nominal prices of Japanese (and the rest of the world ex-China) stock prices amid soaring sales of wheelbarrows following Kuroda’s ‘shock-and-awe’ last night, it is Kyle Bass who brings these surrealists back to earth with some cold-hard-facting. Out of the gate Bass explains the massive significance of what the Japanese are embarking on, “they are essentially doubling the monetary base by the end of 2104.”
It is a “Giant Experiment,” he warns, but when you are backed into a corner and your debts are north of 20 times your government tax revenue, “you’re already insolvent.” Simply put, Bass says they have to do something and they have to something big because they are “about to implode under the weight of their debt.” For a sense of the scale of the BoJ’s ‘experimentation’, Bass sums it up perfectly (and concerningly), “the BoJ is monetizing at a rate around 75% of the Fed on an economy that is one-third the size of the US!”
What they are trying to do is devalue the currency to attempt to become more competitive while holding their rates market flat – the economic zealots running the world’s central banks believe they can live in that Nirvana – and Bass believes that is not the case, as they will lose control of rates, since leaving the zone of insolvency is impossible now. His advice, “if you’re Japanese, spend! or take it out of your country. If you’re not, borrow in JPY and invest in productive assets.” Do not be long JPY or Japanese assets as he concludes with the reality of Japan’s “hollowed out” manufacturing industry and why USDJPY is less important that KRWJPY.
- Jim Rogers: We’re Wiping Out The Savings Class Globally, To Terrible Consequence (Peak Prosperity, March 9, 2013):
Jim Rogers decries the growing uncertainty and recklessness of global central planners as the world enters unchartered financial markets:
For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it’s going to work out, I don’t know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. It’s a peculiar time in world history.
Tags: Agriculture, Bonds, Commodities, Corn, Debt, Dollar, Economy, Euro, Food, Global News, Gold, Government, India, Japan, Jim Rogers, Middle Class, Politics, Quantitative Easing, rice, Silver, Society, soybeans, U.S., wheat, Yen, Yuan
- Presenting Abe’s ‘Super-Secret’ Devaluation Plan – Double-Down (ZeroHedge, Dec 28, 2012):
Much has been made of newly appointed uber-easer Abe’s plans to weaken the JPY by any means possible. Since the global financial crisis began in early 2008, USDJPY has tracked remarkably closely with the ratio of Federal Reserve assets to Bank of Japan assets – as the currency wars escalated. Assuming the Fed proceeds with its planned QE3/4 $1tn expansion, then BoJ assets would need to expand by around JPY100tn to meet this target. The current BoJ holdings of JGBs just crossed JPY100tn – so this new printing is double the current holdings and considerably more than double the planned JPY44tn purchases for the year. Good luck with that given the expected JGB issuance this year is only around JPY44tn and good luck persuading anyone that the BoJ is not directly funding the government in the ultimate reacharound. As the Fed monetizes 1 year of Treasury issuance so the BoJ has to monetize over 2 years of JGB issuance – sustainable?
- China And Japan Dropping Dollar Cross Rate System, Will Transact Directly (ZeroHedge, May 26, 2012):
While various three letter economic schools of thought continue sprouting left and right, in an attempt to validate endless spending predicated on one simple thing: transitory reserve currency status, and we emphasize transitory, reality moves on, oblivious of what economic theoreticians believe it should be doing. As Yomiuri Shimbun reported last night, China and Japan are set to launch direct currency trading, bypassing the dollar, and the associated benefits and risks, entirely. “But how can that be?” dollar purists will scream. After all, when one bypasses the dollar, one commits blasphemy to a reserve currency. Somehow we think China gets that. From the AP: “Japan and China are expected to start direct trading of their currencies as early as June as part of efforts to boost bilateral trade and investment, according to reports. With the planned step, exchange rates between the yen and the yuan will be determined by their transactions, departing from the current “cross rate” system that involves the dollar in setting yen-yuan rates, Kyodo News said on Saturday.”
More specifics on how the world’s second and third largest economy will just say no to dollar hegemony:
The two governments are eyeing setting up markets in Tokyo and Shanghai, the Yomiuri Shimbun said.
The yen-yuan exchange system would help businesses in the world’s second- and third-largest economies reduce risks associated with exchange rate fluctuations in the dollar and cut transaction costs, Kyodo said.
It will be the first time that China has allowed a major currency except the dollar to directly trade with the yuan, Kyodo said.
As usual, why spend time commeting with words, when a simple chart will suffice.
- The Race To Debase In All Its Glory (ZeroHedge, Feb. 19, 2012):
Lest anyone forget what the real story is, here is a reminder. Thank you neo-Keynesian economics for making a mockery of non-scientific notation.
Just wait until (Black?) Monday!
- Dollar Tumbling To Record Low Against Swiss Franc, New Lows Against Yen (ZeroHedge, Aug 7, 2011)
For an early look at the risk aversion gripping the market look no further than the USDCHF and the USDJPY, the first of which just took out 0.75, and the second now almost at BOJ intervention levels. Ironically, since the math Ph.D.s have still not recalibrated their models, it is very likely that the collapse in the dollar will lead to an explosion in ES courtesy of the inverse correlation, which will once and for all confirm that global capital markets and now nothing but a robotic circus.
Remember when the G7 stepped in to valiantly sell yen when the Japanese currency was threatening to take out all of Wall Street with its hundreds of billions in wrong way carry trades? Well, it seems that today’s bizarre sell off in the dollar was due to that particular plan crashing and burning, with Korea defecting from the pact first, and selling its $7 billion in USD acquired in the process of bailing out Japan. It seems it is fair game to buy the Yen once again. From a trading desk:
USD getting spanked today is Bank of Korea selling $7Bn USD it bought during the coordinated USDJPY intervention, and buying GBP and EUR with it. I can understand why they would get rid of the USD, but why buy GBP and EUR with it???? Either way, goes to show how useful it is to do an intervention, they drop the reserves 2 weeks after… we’ll be back to square 1 in no time if everybody follows suit!
Remember – he who defects first and all that jazz…
(and yes, if $7 billion can move the EURUSD by 180 pips, we dread to see what the actual carry unwind instead of just impairment would look like).
While everyone is staring in disbelief at the USDJPY, the real carry action is in the high yielding-YEN pairs, i.e., the development, high growing countries. And it’s a massacre: ZARJPY, NZDJPY, AUDJPY – all are plunging far more than the USD. This is nothing short of a complete carry trade unwind.
The implications: the cheapest recurring source of funding for risk assets – the Yen carry trade, is over. Those who managed to sell early on are lucky. The rest will get such an onslaught of margin calls tomorrow they may need to access the discount window (if Primary Dealers and the luckier banks).
Many will be forced to sell assets to satisfy collateral requirements as ongoing sales of carry pairs push the Yen ever higher, and force ever more liquidity out of the market. And if the Yen carry trade is done, the question is when will the USD, which has also been a carry currency for some time, follow suit.
Support broken as the dollar yen plunges to an all time record low. Everyone now watching the Nikkei to see if it opens. That the BOJ has not intervened yet is beyond ominous, and nothing short of a death sentence for the Yen carry traders.
One can only watch this devastation with horror. USDJPY drops to 76. Unbelievable. Many Wall Street FX desks are blowing up right at this moment.
Submitted by Tyler Durden on 03/16/2011 17:17 -0400
Goldman’s John Noyce is the first FX technician with a proposed take on tonight’s stunning developments. Keep in mind, he, like everyone else is in uncharted (pardon the pun) territory.
Quick JPY Charts – Wednesday 16th March 2011
There are two ways of arriving at a downside target of 77.75-77.56;
- An equal size pip drop from the June ’07 high to that from the August ’98 high to the November ’99 low would target 77.75
- The extension target of the triangle which formed from 1st November ’11 to 15th March comes in at 77.56
The market has been below this region intraday, but, the NY 5pm close was at 77.90 according to the EBS data we use. If we were able to stabilise around 77.75-77.56 you could argue that the last part of the drop was set in an extreme situation with poor liquidity etc. definitely something to watch closely. Not to say the call was for a move this sharp in the first place, but with the help of hindsight on two counts you could argue “target met”.
..If.. the down move does continue the next really clean level is the actual parallel channel support off the August ’98 high which comes in at 71.70 on the linear scale chart.