MAULDIN: Japan Is On The Brink Of Disaster

Business Insider ^ | 5-26-2013 | John Mauldin, Thoughts From The Frontline

[blam]

MAULDIN: Japan Is On The Brink Of Disaster

John Mauldin, Thoughts From The Frontline
May 26, 2013, 9:08 AM

I wrote several years ago that Japan is a bug in search of a windshield. And in January I wrote that 2013 is the Year of the Windshield.

The recent volatility in Japanese markets is breathtaking but characteristic of what one should come to expect from a country that is on the brink of fiscal and economic disaster. I don't mean to be trite, from a global perspective; Japan is not Greece: Japan is the third-largest economy in the world. Its biggest banks are on a par with those of the US. It is a global power in trade and trade finance. Its currency has reserve status. It has two of the world’s six largest corporations and 71 of the largest 500, surpassed only by the US and comfortably ahead of China, with 46. Even with the rest of Asia's big companies combined with China's, the total barely surpasses Japan's (CNN).

In short, when Japan embarks on a very risky fiscal and monetary strategy, it delivers a serious impact on the rest of the world. And doubly so because global growth is now driven by Asia.

Japan has fired the first real shot in what future historians will record as the most significant global currency war since the 1930s and the first in a world dominated by true fiat money.

At the risk of glossing over details, I am going to try and summarize the problems of Japan in a single letter. First, a summary of the summary: Japan has painted itself into the mother all corners. There will be no

(snip)

[Viennacon]

As an epic collapse in Greece was enough to drag the other European economies into the toilet, Japan’s could drag the entire world into a gaping abyss.

[VRW Conspirator]

So, if I read this correctly, the first domino in the world economic collapse will be Japan.

[oust the louse]

Oh boy....he does not mince words. He means what he says.

[blam]

KYLE BASS: Japan Will Have A Bond Crisis Because It Takes 31 Million Years To Count To 1 Quadrillion

[RockyTx]

key words...

Japan will try to export its problems.

[hawaiianninja]

So, if I read this correctly, the first domino in the world economic collapse will be Japan.

Yep. Although IMHO, the domino had already started with Greece. All other economies are wobbling, trying not to topple over by that force. One of the key paragraphs in the article...'though it really doesn't say anything new:

"I can’t with any reasonable certainty tell you how all this will play out, as we are simply in uncharted territory. But I do know I want to own assets that central banks can’t print. Their actions will affect those assets, to be sure – we are going to see more volatility than we would like. But that creates opportunity.

[Zeneta]

Greece is a rounding error in the big picture.

Japan has NO OUT !!

A break in confidence among their bond buyers will send the worlds 3rd largest economy into insolvency (they are insolvent now, but with some confidence), the likes of which the world has never seen.

As has been said by Kyle Bass and Mauldin how awhile now, it’s not a matter of “if” but “when”.

[VanShuyten]

Foreigners only hold about 5-10% of JGB. Most of that is owned by banks an insurance companies. The government can force those companies to hold the bonds indefinitely, so the inflation will be seen on imports. The Japanese are notorious for avoiding imports, and while it will affect raw materials, the export price will remain about the same with a devalued yen. Abe wishes to bring the 1980s back, with a ¥200/$. The debt and imports will be paid off with imported dollars. Japan will run a huge trade surplus, which will be used to pay off bond holders with devalued yen and support the increased costs of oil and metal.

A risky scenario, but it might work. The alternative is a strong yen but a big trade deficit and no way to pay off the debt at all.

You know how Ponzi schemes work, don’t you? The first ones out actually make money. I think Japan wants to be first out.

[cydcharisse]

So, if I read this correctly, this guy is selling something.

[VRW Conspirator]

So, if I read this correctly, this guy is selling something.

Maybe. But watch the video at reply #5.

[bert]

Actually, I get this news letter each week for free

[Zeneta]

The government can force those companies to hold the bonds indefinitely, so the inflation will be seen on imports.

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This has always been the last piece that maintains a “net net” balance, but it certainly comes at a cost for those companies. Repatriating USD’s or Euros into JGB’s for the greater good requires a continued sense of Nationalism.