Zero Hedge on Japan: Why "This Time Won't Be Different"

From Zero Hedge post titled "Why "This Time Won't Be Different" For Japan In Two Charts" (2/6/2013; emphasis is mine):

...The problem is what happens once said rotation [from JBG to shares and equities] and begins?

Well, the clock begins ticking. Because with a debt load of some 230% of GDP, and with debt that is 2000% of government revenue, about five times more than the second highest (Greece), a simple doubling of average interest rates means half of all government revenues goes to pay interest. Double rates again, and it's game over for the funding side of the Japanese P&L statement, as all inbound cash will have to pay down interest, pushing Japan into the long-delayed hyperinflationary spiral.

And, by the way, none of the above is new! In fact, everything said previously has been well-known to every Japanese PM, and central banker for the past 30 years. It is also the reason why nobody has attempted the kind of ultimately suicidal move that Abe is now trying.

The good news is that it will ultimately be the bond market which puts an end to this latest bout of insanity before it is too late. Unless of course, we get bad news, which in Japan will means 2% inflation... then 12%... then 22%.... then 222% and so on.

By that point every central bank will be openly monetizing not only its own but everyone else's debt too, as the full 1930s rerun, which most certainly included full-blown currency war just before full-blown trade war erupted, unfolds.

And as everyone knows from history, both of the above metaphoric wars in the 1930s culminated with a different war. A real one.

Yup. Kyle Bass has also said as much and more.

Japan's Prime Minister pork-cutlet-curry Abe said in the National Diet session on February 7 that his pride and confidence were shattered to pieces when he had to resign in one year the last time around. I guess the now-confident Abe wants something that he can claim as his lasting legacy. Good or bad is not the point.

One of my Japanese twitter followers said Mr. Abe may be thinking that 2% annual inflation　will be linear. Well, he's a poli-sci major. I'm guessing the rules of mathematics apply differently in politics.

The last time Japan's finance minister (Korekiyo Takahashi) inflated the hell out was right before the start of the second Sino-Japan war which was the effective start of World War II in the Far East.

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Zero Hedge: "Detonating the Japanese Debt Time Bomb" With Kyle Bass

From what I have seen so far, the Japanese people are clueless about what's been going on in their own country economically for the past 20 years. Because they don't understand how economy and finance work, so they cling on to the economic cliche - neo-Keynesian this and that, Chicago School this and that, and highly respect Nobel Prize-winning economists like Paul Krugman whenever he utters anything.

They truly believe the official line that deflation is bad and inflation is good, completely forgetting what their government feeds you is a bunch of garbage (figuratively and literally), as the Fukushima I Nuclear Power Plant accident has abundantly shown them (I hope, but hope has become a dirty word).

They are clueless as to how Bank of Japan prints money, and why printing paper money is not creation of wealth. I suppose that is to be expected from a country where they still teach Marxian economics in universities.

They will never know what hits them when it hits them, which Kyle Bass seems to think will happen within 2 years. Just like the Fukushima nuke accident, it will be "beyond expectation". And just like the Fukushima nuke accident, it will be because of the imperial US's fault for causing it and/or not helping Japan (well, there's some truth to that, I guess, at least the former).

From Zero Hedge's Tyler Durden (1/18/2013; emphasis is original):

"Detonating The Japanese Debt Time Bomb" With Kyle Bass

The hyper-correlation of Japanese stocks and the JPY have led many to believe that Abe's miracle promise will be just the ticket to bring the nation's two-decade slump to an end - a 2% inflation target is all you need. However, in a brief CNBC interview, Kyle Bass explains that not only are 99.9% of people wrong about the crisis (explaining the critical aspect of the abrupt turn of twenty years of the 'procylicality of thought' - that deflation is the norm), but Abe's actions have actually brought forward the date of the "detonation of Japan's Debt Time Bomb.

It is the Japanese institutions that own JGBs and they own them at meager rates of interest simply because of the ingrained belief in deflation; when the government begins to target 2% inflation, the swing in forward expectations (he notes to monitor inflation swap breakevens) will be the trigger for Japan's implosion. Bass warns that "Japanese debt is around 24x central government tax revenue and when you sail into the zone of insolvency, nothing you can do will help," though he realizes that calling the end of the 70-year debt super-cyle to a specific date is naive, he does expect the 'bomb' to explode within 18 month to two years.

All of the components for this [bomb] to go off 'all of a sudden' are in place. The clock has started on the qualitative shift in participants' minds that the situation is untenable as the realization that Japan spends 25% of revenue on interest now - and with higher rates (via this supposed inflation) the entire situation becomes farcical as every 1% rise in their cost of capital (or rates) costs them another 25% of revenue!.

On JPY devaluation - The signs are already there that elites are exiting the JPY - with recent M&A transactions - he warns. 20% of exports go to China; this could be halved given the tensions, and a JPY devaluation is not going to restore the competitiveness of that secular decline.

On Japanese stocks - The people buying Japanese stocks, are picking up dimes in front of a bulldozer.
Bass goes on to discuss the US Housing stabilization, European stress, and China's economic opacity.

I think I mentioned it here before, but I still very clearly remember reading the Japanese message boards right after the March 11, 2011 triple disaster. As the reactor buildings exploded one after another, the clueless Japanese were chattering away, saying "We must go out and spend money and have fun! If we refrain from spending money because of the earthquake and tsunami, it will be bad for the economy because it will create more deflation! That won't help the disaster victims, will it?"

They don't even know 25% of the national budget is used to pay interest on the debt. They don't know that rising yields on bonds means bond price is decreasing.

Amen.

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Zero Hedge: Two Spaniards Self-Immolate Due To Financial Problems

"Strong recovery" of the global stock markets in 2012 surely indicates a robust rebound of the global economy, in the minds of central bankers and politicians in the so-called developed nations, from Bernanke to Draghi to Shirakawa, from Rajoy to Obama to Abe.

But people on the street don't seem to buy into that idea, as their lot hasn't particularly improved. It has gotten decidedly worse, apparently, for the two Spaniards, as Tyler Durden at Zero Hedge writes (1/5/2012):

Two Spaniards Self-Immolate Due To Financial Problems

First it was a German, then an Italian, and now, two months, later, the European self-immolation wave has spread to the country that many expect will be the next one to follow Greece into effective debt default. El Pais reports that an impoverished 57-year-old man who set himself on fire in Málaga Thursday, and subsequently died of his injuries at Carlos Haya hospital. He had third-degree burns on 80 percent of his body and suffered a multi-organ failure. The victim, thought to be of Moroccan origin, had worked in construction for years but was out of a job now, said people who knew him. In the last few months he had been scraping a living with the small change he made guiding cars into parking spaces near the hospital, an illegal practice that is usually overlooked by authorities. The police, who have not yet located his relatives, are not ruling out the possibility of an accident just as the man was lighting up a cigarette. Just two minutes before the event, he bought a pack of cigarettes from a local newsstand whose owner asked him how he was doing.

“I don’t even have enough money for food,” he replied. The man is thought to have been homeless at the present time, and seemed even more depressed than on other occasions, said the stand owner.
Several taxi drivers came to the rescue with their vehicles’ fire extinguishers when they saw the man go up in flames on a side street from the hospital. A few hours after being admitted into the emergency room there, he was transferred to a specialized burn unit in Seville, where doctors were unable to save his life.
He was the unlucky one - as BBC follows, another Spaniard also lit himself on fire on Thursday night, in the same city, but lived.

Another man is being treated in the same hospital apparently after setting himself alight in Malaga on Thursday.

The 63-year-old was found with serious injuries beside his burning car under a road bridge, police said.

No other details were given of that man but, according to Spain's El Mundo newspaper, preliminary investigations indicated that the fire had been lit intentionally.
...
Spanish media have reported a number of cases in recent months of people facing poverty in the country's recession killing themselves.

Considering it was an identical act of self-immolation in Tunisia that set off the Arab Spring in the winter of 2011, Europe has for shown far more resiliency to socio-economic collapse than many had expected, although this is not unexpected: after all, Europeans, and especially Spaniards, still have more to lose than gain by rising up against a reverse Robin Hood globalist system bent on taking from what's left of the middle class and giving to the status quo banking oligarchy. Or so they think: the big strawman, is and for the past 150 years has been the welfare state myth.

Then again, now that Spain has almost drained its entire social security fund, and replaced it with worthless ECB repo material, i.e., Spanish bonds, will Spaniards finally wake up and realize that while they were snoozing, their government spent 90% of their pension and retirement money to prop up the Ponzi for one more year. And instead of committing suicide, or even patching up various symptomps, shouldn't the people of Spain, and all of Europe, finally address the real underlying cause of their misery: a dysfunctional government, which contrary to indication, is merely a puppet in a banker-led globalist system?
If not, how many more people have to burn themselves to death before it becomes clear?

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Greek Pensioner Hangs Himself In Protest That "Greece Will Be Wiped Off The Map"

From Zero Hedge (5/30/2012):

Two months ago, an elderly Greek took his life in broad daylight in Athens' central square while decrying the country's traitors in government, and who preferred to take his own life than to defer his debts to his children or "fishing through garbage cans for his sustenance." Hours ago, another tragedy struck.
From Athens News:

A 61-year old pensioner was found hanging from a tree on Wednesday, in the Agios Filipos park of the Nikaia area. The lifeless body of the pensioner was discovered by a park attendant, who also found his suicide note which read as follows:

"The police does not know me. I have never touched a drink in my life. Of women and drugs I have never even dreamed of. I have never been to a kafenio (coffee house), I just worked all day! But I commited one horrendous crime: I became a professional at age 40 and I plunged myself in debt. Now, I’m an idiot of 61 years and I have to pay. I hope my grandchildren are not born in Greece, seeing as there will be no Greeks here from now on. Let them at least know another language, because Greek will be wiped off the map! Unless of course there was a politician with Thatcher’s balls so as to put us and our state in line.

Signed, Alexandros 29/5/2012”

His neighbours described the pensioner – a father of two- as a hard working man. He had been employed in ship repairs and construction sites and up until recently, he had been working as an electrician on a merchant ship.

He was facing sizeable financial problems and it was these that pushed him over the edge.

According to neighbours, prior to taking his own life, he was seen wearing his work overalls, carrying his tools and sitting on a bench in the park.

Tragic.

===================================
The Maastricht Treaty was signed in February 1992, around the time when this pensioner took on debt.

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Japan's Sovereign Debt Situation in 4 Charts

Move over, Greece.

From Zero Hedge (5/15/2012):

Sovereign debt to GDP: Japan is the only country over 200%, and set to go higher after the March 11, 2011 triple disaster.

Sovereign debt interest payment to government revenues: Japan is the only country over 20%.

Japan's sovereign debt to GDP ratio, since 1980: 45-degree angle since early 1990s, after the real estate bubble burst.

Sovereign debt to government revenues: Japan looks to be about 1,900%. Greece comes in second, with about 400%.

Zero Hedge cites the source as: Harvard Business School, 9-212-091, Hayman Capital Management

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#Fukushima I Nuke Plant: Data from Thermal Imaging Cameras Suppressed by the Japanese Government

From Zero Hedge, citing Jerusalem Post article on 3/152011 (emphasis is original, paragraph breaks inserted for easier reading; 3/19/2011):

According to the latest Digitalglobe overflight, the situation in Reactor 4 continues to deteriorate. We wonder where precisely in the Reactor 1,3, and 4 wreckage are the working water pumps that are about to be electrified?

Far more importantly, since heat appears to be the biggest issue, why have no thermal or IR photos been released to the public, and most importantly why is the Japanese government actively covering up thermal data?

From the JPost:

"As the world continues to gaze with concern at Japan’s Fukushima nuclear power plant, hi-tech security cameras installed by an Israeli defense firm are recording events at the troubled core from an insider’s vantage point.

The Arava-based Magna BSP company, which specializes in producing and installing stereoscopic sensory and thermal imaging cameras, had been contracted to place cameras around one of the plant’s six cores – the core that has been experiencing explosions and overheating.

Speaking to The Jerusalem Post on Monday, Magna’s head, Haim Siboni, said the thermal cameras also had the ability to detect the presence of radioactive clouds in the air, but added that Magna had not been able to gain access to the images recorded by the cameras at this time."

Stunningly not even the contractor is allowed to see its own recorded data:

"Although Magna is able to gain remote access to its computer system, which receives the cameras’ images, Siboni said his company had not yet been authorized to do so. “We have not been allowed to take control remotely yet,” Siboni said."

Surely the classified data must be perfectly normal if the completely discredited Japanese government is keeping it under such tight lock and seal.


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Notice the Jerusalem Post article doesn't specify exactly which reactor's core. It simply says "one of the plant’s six cores – the core that has been experiencing explosions and overheating."

Well, which exploding and overheating core? No. 1? No.3? Or No.4? Even that is secret..

I'm not sure if it is a deliberate suppression by the Japanese government, though. At this point, it may be just the sheer incompetence; they simply forgot all about it.

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Wired: Vote for Your Favorite Sexy Geeks of 2010

Hmmmm. Tyler Durden of Zero Hedge is getting major...

You can still vote at Wired. It's kind of weird to see him up there ...

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Brave New, Unhinged World of Fed Running Amok

That's the impression I get, just by reading the headlines at Zero Hedge. This feels like a second death of the system (the first one occurred in September 2008), and I'm sure there will be a third one, fourth one, fifth one, down the toilet.


CLSA's Chris Wood Says Bernanke Will Continue "Mad Experiment" Until He Kills US Dollar Paper Standard, Looks Toward QE3

Fitch Puts Entire US Residential Mortgage Servicer Space On Negative Outlook Over Fraudclosure Concerns

Fed's Attempt To Bloat Curve Belly Is Successful As 5s30s Goes Ballistic

Silver Breaks $26; Shows What A Little RICO Lawsuit Can Do To The Price Of A Manipulated Commodity

An Angry Brazil Calls On US To Change Its Policy Stance

Market Prices In QE 7 As S&P Says Cost To Resolve GSEs Could Approach $700 Billion, Double FHFA Estimate

And that's not even half a page...

By the way, the Federal Reserve is celebrating 100-year anniversary of its birth, on Jekyll Island, on November 5 and 6.

Celebrating the 100 years of destroying the value of US dollars, celebrating their courageous launch of QE2 (3, 4, 5, 6, .... n, until the entire yield curve flattens at exactly zero percent). Crooks.

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Zero Hedge: Goldman May Be At It Again, This Time on Greece

Zero Hedge's Tyler Durden thinks that the Vampire Squid aka Goldman Sachs is at it again, this time sucking the blood off Greece, just like it did off A.I.G. Spain, Portugal, Dubai, too. Japan and the U.S. next. Maybe.

The Ever Increasing Parallels Between AIG And Greece... And The CDS Puppetmaster Behind It All (Tyler Durden, 2/8/2010 Zero Hedge)

"...... Yet as we look forward, we ask, who now determines the variation margin on Greek CDS (and Portugal, and Dubai, and Spain, and, pretty soon, Japan and the US), the associated recovery rate, and how much collateral should be posted by sellers of Greek protection? If Greek banks, as the rumors goes, indeed sold Greek protection, and, as the rumor also goes, Goldman was the bulk buyer, either in prop or flow capacity, it is precisely Goldman, just like in the AIG case, that can now dictate what the collateral margin that Greek counterparties, and by extension the very nation of Greece, have to post on billions of dollars of Greek insurance. Let's say Goldman thinks Greece's debt recovery is 75 cents and the CDS should be trading at 700 bps, instead of the "prevailing" consensus of a 90 recovery and 450 spread, then it will very likely get its way when demanding extra capital to cover potential shortfalls, since Goldman itself has been instrumental in covering up Greece's catastrophic financial state and continues to be a critical factor in any future refinancing efforts on behalf of Greece [Note: Goldman is trying to broker Greek debt off to China]. Obviously this incremental margin, which only Goldman will ever see, even if the CDS was purchased on a flow basis, will never be downstreamed on behalf of its clients, and instead will be used to [buy futuresbuy steepenersprepay 2011 bonusesbuy more treasuries for the BONY $60 billion Treasury rainy day fund].

"In essence, through its conflict of interest, its unshakable negotiating position, and its facility to determine collateral requirements and variation margin, Goldman can expand its previous position of strength from dictating merely AIG and Federal Reserve decision making, to one which determines sovereign policy! This is unmitigated lunacy and a recipe for financial collapse at the global level.

"This is yet another AIG in the making, with Goldman this time likely threatening to accelerate the collapse not merely of the US financial system, but of the global one, in order to attain virtually infinite negotiating leverage. Of course, the world will not allow a Greece-initiated domino, allowing Goldman to call everyone's bluff once again.

"As the amount of gross and net sovereign CDS notional is constantly increasing, as more and more hedge funds join the shorting fray with Goldman as the intermediate (just like in AIG), it behooves any remaining regulators and any sensible Federal Reserve parties to supervise precisely what the terms of Goldman's collateral margins with various sovereign debt sellers are, especially when it pertains to increasingly distressed CDS, where a liquidity squeeze, again as in the AIG case, would have tremendous adverse downstream consequences. If indeed Goldman's counterparties are the banks of respective countries, then the parallels with AIG are nearly complete. And we all know what happened then.

"Furthermore, we are now convinced that Goldman will join the government in facilitating the engineered market swoon with a bifurcated goal: while the Treasury will take advantage of a sell off to offload as many UST as it can in the rush for safety (which could backfire now that Gold is increasingly seen as a dollar alternative), Goldman (with or without Warren Buffett - it depends on what the actuarial tables say) will jettison its own stock price in order to go private in an increasingly hostile world. "

[Here's a better link for the Spiegel article on Goldman instrumental in covering up Greece's financial state. Der Spiegel writes better English than Google Translate.]

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