Elaine Meinel Supkis
The financial world shuddered violently when Japan and China played interest rate games. The entire world's economic well-being lies in keeping the present status quo up and running. This status quo means the US reserves will continue to flounder or drop while Russia, China and Japan's rise astronomically. The longer this runs, the more destructive it becomes.
BBC: Japan's central bank has kept interest rates on hold at 0.5% following last month's rate increase.The decision had been widely expected, with the bank facing political pressure not to raise interest rates too quickly with inflation still subdued. Last month's quarter-point rise was only the bank's second increase in more than six years.
In July last year, the bank raised rates to 0.25% ending six years of zero interest rates. The March decision to keep rates on hold was unanimous, the bank said.
Japan's interest rates are still well below the benchmark rates of 5.25% in the US and 3.75% in the eurozone.
Inflation in Japan isn't .5% or less. The Japanese consumers are being brutally squeezed. Are they offered .5% loans for making purchases? Actually, figuring out how Japan has managed to create and then keep running, a deflationary society while simultaneously hooking into the world's natural inflation system to create a thing the money guys like to call 'the carry trade' to carry off all our industries and transfer ownership of them to the Japanese!
Understanding this game is life and death for Americans who are the ones who foolishly fell into an unwitting trap for this trap didn't get devised by deliberation, it happened accidentally but once the effects of it were figured out by the Japanese government and top industrialists, they hooted with joy and have run it viciously since.
Alas, the Chinese figured it out too and piggy-backed onto it and they must have told Russia because they too are now riding this pretty pony. And we are going bankrupt while the supposedly bankrupt Japanese have the world's second biggest FOREX reserves! China, of course, has the biggest of all.
Here is a website advertising 'cheap' loans for buying land in Japan at 'only' 3%.
Qualifying for a Loan from Banks in Japan is not what it used to be. Expatriates today will find it much easier to qualify for a mortgage – in the last year or so some banks in Japan have even started granting mortgages to expatriates who don’t have permanent residence status or a Japanese spouse.
I wanted to find out what interest rates are being offered for Japanese assets. This is like pulling teeth because few people who write in English are even mentioning this subject. When I used google, my own stuff comes up! Hey, isn't anyone out there wondering about this?
Obviously not. But this particular real estate company in Tokyo is selling to expatriates and so it was in English and I could see the information. 3% loans and the market in Japan is dead? HUH? Look at this graph!
Holy cow. What on earth? One could see the hyper-inflation that happened in the past when Japan ran a free trade system going to the USA but a totally closed market returning to Japan, they got very rich off this wonderful mistrade! Since the money flowing from America stayed in Japan, banks had lots of loot to loan and there was a huge run up in asset prices.
Then came the crash here in America and this crashed trade in Japan and the money stopped and the bubble burst and property prices dropped. But after that, trade with the USA began to blossom and then totally took off. On top of this, the big auto makers moved factories here so they could pretend they are American and thus, skim off all the profits but not be stopped by tariffs or barriers. This meant they would no longer hire Japanese labor and many Japanese workers have suffered declining wages at home due to this outsourcing.
Then Japan's rulers outsourced heavily to China. That wiped out Japanese workers. So property prices collapsed and stayed that way because the government doesn't want money flowing to banks and then to property purchases or any purchases at all.
It all went to a place 99% of America ignores: the reserve funds!
So despite 3% loans, property values in Japan barely budge and they are combing the planet looking for buyers in distant lands. Assets in much of the first world and second world have shot up in value especially in the nearly bankrupt USA but not in Japan which is sitting on one of the biggest piles of money on earth. It is just that no one in Japan outside of the big money guys, gets any benefits from this.
Here is an analysis that had me laughing until tears ran down my cheeks:
Published: March 13 2007 11:54 | Last updated: March 13 2007 19:49The explosive growth in credit derivatives is bypassing Japan. It accounts for 5 per cent of global activity, estimates the British Bankers’ Association, compared with about 40 per cent for London. The BBA sees Japan’s share rising by only a percentage point by the end of next year. This is largely structural. Japan Inc traditionally borrows from banks rather than the capital markets; the underlying corporate bond market is about a 10th the size of the US market. The “main bank” system, under which lenders prefer to waive debts rather than push borrowers into bankruptcy, is also responsible for the paucity of defaults: the last one was six years ago. Little wonder investors are not rushing to insure against that risk by buying credit default swaps.
Illiquidity combined with a shortage of higher-yielding paper means tight spreads. Even companies with an ostensibly risky outlook move within a relatively sedate range, aided by their ratings, which are often, surprisingly, investment grade. Take the beleaguered consumer finance industry, reeling under legal changes that radically undermine its profitability. Last week CDSs in three of the four top consumer finance names were trading at spreads lower, or just a touch tighter, than those of blue-chip US investment banks including Goldman Sachs and Morgan Stanley. Sure, that was an especially traumatic week, but even in more normal times spreads on iTraxx indices based on Japanese CDSs are sharply lower than US benchmarks.
My goodness gracious. Um, so Japan, the land that is fueling the entire 'carry trade' nexus isn't partaking of it at all? Less than 3% versus former empire England's 40%? And who is losing industrial base powers?
England is busy begging Japan and China to buy their factories and keep them in England, right? And the English government is in serious financial straits to the point they are demanding doctors dock their pay so they can keep filthy hospitals limping along? And what about the USA who is soaking up 60% of this garbage being churned out by the Bank of Japan?
Oh look! Starting with right around 9/11/1 when Bush told us to go shopping and the USA went on a $2.5 trillion spending spree with government budget over-runs and personal debt to the tune of $40+ Trillion? Our industrial base absolutely collapsed, didn't it? Nearly totally. If it drops any further, we will be producing exactly nothing.
For years now, we have been told repeatedly that the root cause of Japan's economic problems is deflation. We have been forced into thinking that deflation is the culprit. Allow me to share a secret - the central banks want you to believe that deflation is a total disaster so that they can freely print more money, thereby creating inflation. After all, who benefits from the monetisation of the economy?Despite all the brainwashing, close inspection reveals that Japan never really had any deflation! The truth is that throughout the past 15 years, Japan's money supply has continued to grow (inflation). Japan has witnessed inflation, and not deflation, since 1980. Sure, Japanese asset prices have fallen since 1990, but the cause is not deflation, as advertised by the establishment. In fact, a sharp rise in interest-rates was the trigger, which caused the Japanese stock and property bubbles to burst.
Something extremely fishy is going on here. If high interest rates killed the markets in Japan then the hyper-low rates would make it join the world asset climb we have been seeing in nearly all other countries even some very poor ones! But curiously, Japan is mired in a depression---fostered by and run for the top industrialists! Like the Chinese, they have plans and long memories. They remember WWII and some of the very top government officials including the highest offices, are the sons of men who were declared war criminals and who ran slave camps, etc.
We support these guys as the decimate our industrial base! We demand the Chinese spend more money domestically but don't demand the same from the very, very rich Japanese who are beggaring their own people in order to destroy our industrial base.
Isn't revenge sweet for them?
I think the official Japanese deflation rate is totally manufactured, ie: fake.The CIA even has made this nice chart that clearly shows something very fishy is going on.
Here is the section where they estimate the USA's inflation rate at a ridiculous 2.5% which everyone reading this in America knows, is utterly, totally fake. It is set at this rate to cheat the ever-growing retiree population. As someone on a fixed income, I know this is ridiculous: actual purchasing power has dropped significantly for all of us.
Here are the countries with the lowest rates and Japan stands alone of all industrial nations, having years and years now of negative inflation. Israel, which gets free infusions of vast sums of money from the increasingly bankrupt USA, enjoys 0% inflation which I find very hard to believe except via theft.
Some of the others are hedge-fund hide-outs where one can slip in large funds and not have it recorded.
Deflation has persisted in Japan for almost a decade. The consumer price index has fallen for five consecutive years since 1998, and GDP deflator figures indicate a decline in constant prices over a nine-year period since 1994. (Fig. 1) Among all the countries since World War II, Japan has the longest experience of deflation.
What a fabulous weapon! The minute the sons of the losers of WWII discovered their banking policies and public finances were destroying America, they revved up their engines and have kept the course...to the present. And we begged them to continue! This month!
We want this destruction to roar onwards! This is making the top 10% of Americans very, very rich!
Kobayashi:
But is it true that Japan's deflation is the result of some exogenous factor? Many economists point to Japan's aging population and the other two points as exogenous factors driving deflation. If they are right, economic policy cannot solve these points - policy makers would have to accept deflation as part of the environment under which the economy operates. And again, if those economists are right, we have to ask this question: Given the deflationary environment, what is the most effective goal for monetary policy? On the other hand, if economic policy can be used as an effective tool to eliminate the cause of deflation, we do not have to accept deflation as part of Japan's economic fate. We can use economic policy to defeat deflation. Therefore, identifying the true cause of deflation is an extremely important step toward finding ways to eliminate it.
The presumption that the Japanese rulers want to 'defeat deflation' is pure insanity. Since they don't do a thing to make this stop one should realize they want it to continue. And the behavior of all the destroyers of our own economy celebrating the contiunation of this ruinous system is proof that many people are very much in love with this fake deflation/depression imposed like an iron maiden on the Japanese workers while a fake inflation/asset rise in the USA is decimating the finances of the working class there: this dual destruction of the purchasing power and the ability to save at compound interest above the rate of inflation is beggaring the working class.
Now that we have examined some of the problems in the assumptions made regarding deflation, let's look once more at deflation in Japan. One important fact we cannot ignore is this: deflation in Japan began around the same time that the banks began to seriously suffer from a shortage of capital.*snip*
Therefore, it is difficult to argue that deflation in Japan has an exogenous cause, such as an aging population. My hypothesis is that the banks' problems have spawned a mechanism that is driving deflation.
*snip*
From the above it is clear that Japan's zero interest policy has boosted demand for cash. We can assume that this has resulted in a mild form of debt deflation.
The next question we need to ask is: Why are deposits still earning zero interest in Japan?
If I were a Japanese saver forced to keep everything in cash I would be screaming. Loudly. Here in America, as a saver, I am pissed as hell that interest rates being offered to people depositing money in banks has collapsed for years. If you buy government bonds, you do much better but this means losing contact with one's money for many years! Japan's government buys lots and lots of our government bonds and they don't care if they never mature.
By David Pilling in Tokyo
Published: March 2 2007 03:09 | Last updated: March 2 2007 03:09
Japanese inflation as measured by the core consumer price index fell to zero in January, the first flat reading in eight months, according to official statistics released on Friday.The rate of change of core CPI, which excludes fresh food but not energy, fell to 0.0 in January from 0.1 per cent in December.
Stripped of energy prices, the normal practice in most advanced economies, the CPI fell 0.2 per cent, the 13th straight month of decline.
Even including energy, the core inflation could turn negative over the next month or two, reflecting cheaper prices for crude oil than a year ago.
When gas prices went up, inflation in Japan collapsed. When the price of gas went down, the deflation continued in Japan. When the price of raw materials went up world-wide, deflation grew worse in Japan. Japan imports nearly all its raw materials. How's that going now? Eh? Is someone pulling some very big strings here?
China has sought to slow the rush into Shanghai stocks by limiting the power of companies to reinvest share sale cash in other instruments.The move is part of a strategy to regulate China's booming stock market and curb runaway equity prices.
The China Securities Regulatory Commission has decreed that firms must consult shareholders before reinvesting large amounts of raised capital.
The Chinese appear to me to be the people playing fair here. They strengthened the yuan, raised interest rates and are taking control of their own bubble economy. But they are the bad guys in the Japanese/ American/European financial interests which have been milking the trade imbalance with Japan and the USA via the super-cheap interest rates based on this supposed 'deflation' in Japan!
March 15 (Bloomberg) -- The yen may weaken against the euro and the dollar as investors resume borrowing in the Japanese currency and buy higher-yielding assets overseas.The Japanese currency may fall on bets yesterday's stock market rally in the U.S. will persuade investors to buy riskier assets overseas and fund them with low-yielding currencies including the yen, a practice known as the carry trade. An expected increase in U.S. wholesale prices may reduce the likelihood of a cut in interest rates by the Federal Reserve.
This allows the Fed an excuse to cut interest rates here. Why not drop the damn thing to zero and have an equally fake economy? That would be wildly popular here. Of course, inflation of assets would go through the roof but then, the holders of assets would love that.
This is destroying industry, of course, just as my earlier story about how nurses and doctors in England and the USA are being asked to disappear or lose wealth and the biggest industry hirings are for cheap bed pan changers and Walmart part-timers. Gah.
BEIJING - China's central bank said Saturday it will raise key interest rates by more than a quarter percentage point in a move to cool torrid economic growth — the fourth increase in a year.The 0.27 percentage point hike in one-year deposit and lending benchmark rates will go into effect Sunday, the People's Bank of China said.
That would raise lending rates to 6.39 percent and deposit rates to 2.79 percent, the bank said in a statement on its Web site.
European bond rates rise, too.
March 17 (Bloomberg) -- European 10-year government bonds posted a weekly gain as concern over mortgage loans in the U.S. caused investors to withdraw from riskier assets in favor of fixed-income debt.Yields on the benchmark bund slid to the lowest in 2007 this week as fears of bankruptcies and a slowdown in the U.S. economy led to global equity markets resuming a selloff that halted last week. Benchmark 10-year yields also fell below two- year yields for the first time this year as investors shunned riskier assets and fueled demand for safety in fixed-income securities.
People aren't looking at the big picture here: the delusion that everyone is our good buddy and loves us when we defeated them in major wars has got to be the most naive thing on earth. And to think no one wants to see us fail as an empire is pure stupidity.
All empires imagine they are 'keeping the peace' and 'protecting everyone's rights' etc. Even as people tell the empire, they hate it, this delusion continues. Today, the USA's place in the hearts and minds of much of the world is dropping like a rock. We are increasingly hated and reviled. And this is going to cost us dearly. People planning to cheat someone are very friendly and smile a lot.
This is the main tool of all con artists: to assure the person they plan to destroy economically, they are good friends and the con man wants his mark to be very, very rich. Without working, of course. Magic money. Money that comes boiling out of no where.
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I see they're recycling the word "exogenous." That was the favorite of WSW guests and CNBC yammerers pre-9/11 and especially pre-March of 2000: "Only some 'exogenous' event can ruin our fun."
They couldn't ever think of anything. 'Guess the master planners had to stage the 'exogenous' event soon into W's coup, before anyone figured out they'd installed a megalomaniacal dope.
Posted by: D. F. Facti | March 20, 2007 at 01:34 PM
An economic weapon, interesting… how about a snazzy title like Silent Weapons for Quiet Wars.
http://www.whale.to/b/silentweapon.html
http://www.paranoiamagazine.com/federalpen.html
Posted by: Canuck | March 20, 2007 at 02:08 PM
"Here is a graph from Financial Sense.com showing how our industrial base/manufacturing jobs collapsed right after 9/11:"
I don't think so.
It looks to me like it shows how our industrial base/manufacturing jobs collapsed between 1979-1983.
And if you're careful about how you draw your vertical lines, you'll note that the collapse you're talking about actually began in late '00/early '01, not "right after 9/11".
Posted by: JSmith | March 20, 2007 at 02:52 PM
The Big Slide started about 1968. Until around 1968, there was a factory around every corner. The Big Slide has been happening ever since. The business of actually making usable stuff has diminished continually since then. It was Japan that started it, then the rest of the world. I do not look at the world through the abstract concept of money and 'value'. If you are not producing something, you eventually will not have anything.
Halliburton is moving too the United Arab Emirates, but nobody I know is. Only the very rich and the very poor can cross our borders on a permanent basis. The very rich are leaving and the very poor are coming. Something about this just cannot add up!
Posted by: blues | March 20, 2007 at 03:38 PM
If you look at the graph, you can see how it goes violently up and down, mostly down. But after 2000, it plunges.
And this is the truth: our draining of jobs has been stupendous this last seven years. If you exclude the Japanese car assembly plants, it is percipitous.
Posted by: Elaine Meinel Supkis | March 20, 2007 at 05:50 PM
Facti: love your comment, thanks for the reminder. Heh.
Blues: we will be Argentina. Or Russia circa 1995. Terrible conditions.
Posted by: Elaine Meinel Supkis | March 20, 2007 at 05:51 PM
Don't know what is wrong what is rite but i know that every one has there own point of view and same goes to this one
Posted by: Belstaff Outlets UK | December 15, 2011 at 01:42 PM