Japan's New PM Warns Country At "Risk Of Collapse" Under Massive Debt Load

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Fri, 06/11/2010 - 11:05 | 408147 Mr Lennon Hendrix
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The failure will be epic.  Gold and silver is all you can rely on.

Fri, 06/11/2010 - 13:34 | 408487 Gold...Bitches
Gold...Bitches's picture

Hey man, don't interrupt my concentration with facts and reality.  I'm having fun over here whistling while I walk past the graveyard.

Fri, 06/11/2010 - 11:07 | 408150 yabs
yabs's picture

shocking after all these years I had no idea that 20 plus years of keynesian

nuclear responses to the japanese problem had resulted in nothing more than a huge debt pile

You mean to say Keynes was maybe wrong?

News to me

Fri, 06/11/2010 - 11:11 | 408160 SteveNYC
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Wait until Bernanke blows the US out of the water! We will be Japan, with a broke and indebted citizenry. At least they have that Eastern wisdom of being able to "save" some of what they produce, instead of spend it all as well as spend that which they have BORROWED.

Done, done, and done.

Fri, 06/11/2010 - 11:47 | 408257 EscapeKey
EscapeKey's picture

No, because This Time is Different (tm). Bernanke will implement his Keynes-inspired policies in his own, unique, disastrous way.


Fri, 06/11/2010 - 12:14 | 408312 B9K9
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What many seem to miss, and what gets Mako in so much trouble, is that we were always done. The ending we are rapidly approaching was baked in before we were born.

As Trav observes, we had two choices: full stop in 2008 (which Denninger advocate(d/s), thus bringing on immediate death, or a hail mary attempt aka extend & pretend, that would put off until tomorrow something we don't want to deal with today.

Ben isn't clueless; he, more than anyone knows just how unstable our credit-money system is. It can NEVER contract, it must always grow.

Keynesian theory is a process of justifying a means to an end. Since our credit-money system can never contract, the power-elite needed some rationale in which to advance the notion that public spending should/could substitute for private sector de-leveraging. That is, total aggregate demand.

But it's all for naught. We need some great new invention, something to get the 6b+ people on this globe all moving in the same direction with passion, commitment and risk. Absent that, Ben has no real power. All he could do was facilitate a temporary extension on our collective sentence.

Fri, 06/11/2010 - 13:47 | 408520 Wyndtunnel
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Maybe if they legalized, regulated and taxed the sex trade...and party drugs...and allow people to pay for the right to drive as fast as they want... The world is totally screwed and morals are so, like 18th Century..why not open the floodgates of depravity... it's not like there is that much further to fall..seen any KeiSha videos lately?

Fri, 06/11/2010 - 15:55 | 408766 trav7777
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I also wanna put out there that there is no point or need for a "full stop."

Just hyperinflate.  Absolve the debt, repudiate, forgive, jubilee.  The Fed is trying to trickle its balance sheet up slowly to maintain the return on its own money and keep its bankers receiving "interest" payments which can be translated to real things for as long as possible.

But, the debtmoney system is DONE.  There's no way to pay it all back and why should we?  Who is ALL of the money ultimately owed to?  Well, sheeit, everyone take out a FRN and see what the name is of the fkin BANK that issues them.  It's the Federal Reserve.  All dollars are owed to them.

Just force majeur the bank and forgive all debts owed it.  We lived from 1945 through 1970 on the back of BW, an asset-backed currency while we inflated domestically.  Then, we lived from the Nixon Gold Window to the present by promising to pay back in whatever you could get for a FRN plus interest.  So, the debt FRN would collapse and all the inflation that is threatening to unwind would be perfected.  So what?

Fiat currency is brilliant in its simplicity.  Print it then tax it, like tally sticks, a stable money system.  And the market will bitchslap discount you if you overissue, simple as that...it will be sniffed out. 

But, what this does is takes the power to coin money away from the banks.  The sole source of ultimate power is the ability to cause money to exist and charge an interest rate for it.  Money you never had in the first place.  All this US Z1 credit out there..$55T or so.  It's owed with interest, all of it, every last dollar, to a bank which essentially owes the Federal Reserve it or is a partner in the Federal Reserve system.

Did the Fed have $55T in its original capitalization?  If your answer to this question is not YES, then you have your lyin eyes telling you that banks have lent what they DID NOT HAVE.

Consequently, there is no consideration, the contract between us and the Fed is void.

We have to go back to tally sticks and Real Bills.  Don't worry, these financed trade and growth for centuries. 

Debt won't cut it.  Yes, the future is one of economic contraction along the decline curve of the oil supply.  But it need NOT be all-stop immediate all-out collapse...over what, ACCOUNTING LEDGERS?

An asteroid was not going to hit the earth in 2008.  The Sun did not threaten to go supernova.  What happened was that the liabilities side of a balance sheet crossed the asset side, essentially.  This is all a fiction created by bankers to get us to WORK and give them REAL things for paper and imaginary things.

NOBODY would have bought this 200 years ago, are we that stupid now?  The entire monetary system is now something that used to get kiting lenders and goldsmiths lynched.

What Douchinger fails to understand or maybe he conceals, is that this needs to be the end for paper pushers like him.  It needs to be the end of the FRN, which all his wealth is denominated in.  The Fed and the debt system need to end.  BB did exactly what I told Douchinger he would do, a monetary/QE hail mary.  They have essentially forgiven $2T of the debt owed them by purchasing it, liquifying.  It won't stop it tho, as that will only tide the FRN system over until the liquidity crunch returns and it WILL return and is returning.  The Fed had hoped that growth would return, but it has not and will not.  This is because the Fed does not control energy supply, Mother Nature does.  And she ALWAYS bats last.  And the catcher is telling her your pitches.

Once the Fed liquifies everything or it defaults, its products won't be worth anything anyhow.  The reason is because 0% is as low as you can go - there is NO organic demand for FRNs anymore.  The only demand is transient, cashflow stuff, to service existing debt, and to repay it.  That is deflation writ large.

Either way the system goes bye bye.  Many people cannot live with this concept that there is another reality outside of FRNs and debtmoney.  This is our 3rd central bank, we'll live.  We'll also live without this "credit system."  There will be credit and means of transaction via money will SPONTANEOUSLY self-organize.  Life goes on.  No reason to commit suicide over a piece of paper saying you "owe" this or that.  I can't get over how people would let an accountant rule them by some numbers on a piece of paper.  Just walk and move on with your life.

Even inter arma, people are born, they fall in love, they have good times and bad...life always goes on.  We need to find meaning within ourselves beyond the love of money.

Fri, 06/11/2010 - 18:39 | 409068 aaronvelasquez
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Fri, 06/11/2010 - 19:56 | 409160 SteveNYC
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Very well said. I don't see hyperinflation without a civil war though, or a civil bloodbath, one or the other. Deflation will rule for sometime before this occurs.

I find hilarity in your consistency in referring to Karl as "Douchinger", I don't think you have ever deferred from this label, hilarious!

Fri, 06/11/2010 - 23:39 | 409367 karateman
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LOL! Trav's posts are so well thought out and informative that I look for his posts specifically every few days. How do I find them? I use "douchinger" as my search query! LOL!

Fri, 06/11/2010 - 18:46 | 409072 nuinut
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 We need some great new invention, something to get the 6b+ people on this globe all moving in the same direction with passion, commitment and risk. Absent that, Ben has no real power. All he could do was facilitate a temporary extension on our collective sentence.

Ben is doing a bang-up job, in that context. As far as a great new invention, how about an inevitable, natural and unstoppable one, quoted from "It's the Debt, Stupid":
Literally, Treasuries have only one way they can go from here... down. Compression can continue a while longer, but prices can't go any higher than the ceiling, the 0% ceiling. And the greater the compression, the more explosive the downward move will be when it finally happens.

This is a 30 year trend that has just hit its ceiling during this crisis. It cannot be continued indefinitely. You cannot offer yields below zero, and you cannot stay pinned to the ceiling.

This is connected to everything in today's crisis. Once the Treasury bubble pops, everything else will collapse too. Conversely, any number of unknown things, "Black Swans", could pop this Treasury bubble. It is the US Achilles' heel right now.

Of course Ben is just going to keep printing and loaning "discount" 0% Benny-Bucks to the primary dealers who then carry the Treasury debt on the down-low until the market finally calls him (and them) on it. But how long do you really think this "pushing on the ceiling" can last? The USG has an appetite of a few trillion a year now WITHOUT any inflation and without any black swans. And a good deal of that is structural.

So when will this bubble pop? What will it mean to everything else? And what will the world look like once everything settles down again?

Well I cannot answer the first question other than to say "sooner rather than later." But as this debt collapse happens, gold can and will recapitalize our world with its broken balance sheet built on debt. Gold will, simply because it is impossible for fiat to do it.

The run from US treasuries is the event we are waiting for, as the start of the collapse of debt. 

As to what sparks it, well any number of things could, but the inevitability of the run is the important thing.

It is important to understand that "holding fiat" means not only holding currency, but also anything denominated in it, debt, long term contracts, bonds. Stocks are a little different because they are equity positions. But they too will suffer because a lot of the companies that issue stock have also issued debt into the debt markets. And these debt markets are senior to the stock markets, meaning that if/when a company is liquidated, the stock holders get nothing and the debt holders get a haircut.

So it is all very complicated and confusing, how collapse will play out.


"It's the Debt, Stupid"

Fri, 06/11/2010 - 12:02 | 408289 mdwagner
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The main problem with Keynesians is that they NEVER cut spending when the economy is better to build up a surplus.  The government spends even more when tax revenues are good.  Spending money is crack for politicians.

Fri, 06/11/2010 - 13:37 | 408493 Zerozen
Zerozen's picture

Much like communism, Keynesianism sounds good in theory only...

Fri, 06/11/2010 - 12:18 | 408320 Paul S.
Paul S.'s picture

R.I.P. John Maynard Keynes.

Fri, 06/11/2010 - 13:38 | 408500 bada boom
bada boom's picture

Please, no peace for that bastard.

Fri, 06/11/2010 - 13:41 | 408507 bada boom
bada boom's picture

Wait a second, maybe I am his bastard child.

Fri, 06/11/2010 - 12:55 | 408416 Popo
Popo's picture

One must also note however, that Japan proves the "low interest rates lead to inflation" argument to be specious.


Fri, 06/11/2010 - 16:02 | 408773 trav7777
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Low interest rates in Japan were caused by the decline in economicalness OF Japan.

It is simply critical that people understand this.  Money or credit is a SUPPLY and demand instrument.

As a lender, my price for credit is the interest rate.  If there is high demand, I charge more.  If there is low demand, I charge less.

There is NO organic demand for Yen at 0%.  Hasn't been since they hit the supply-side wall.  You cannot repay even at 0% if you are facing aggregate contraction.

Interest rate regimes can only modulate during times of growth.  And the member banks controlled the money supply, the FFR did not.  But banks cannot lend at 6% if the economic activities out there only produce 5% RoR.  Banks *must* then drop the price of credit below that.  This is what has occurred.

Credit must ALWAYS be priced slightly below realworld yields.

Fri, 06/11/2010 - 11:10 | 408158 yabs
yabs's picture

Yep the entire world is on the cusp of a keynesian debt Nuclear bomb detonation

the fuse is getting shorter by the minute

they can print all they want but liquidity is not the problem

solvency is and thats a huge difference

Fri, 06/11/2010 - 11:39 | 408239 John Bigboote
John Bigboote's picture

Nuclear bombs don't have fuses. You can't light them with a match. They have little red digital numbers that count down to zero and make little beeping sounds every second.

Unfortunately, MacGruber is the only one available to save us and we all know how that ends.

Fri, 06/11/2010 - 13:56 | 408535 Dr. No
Dr. No's picture

Modern bombs dont tick, they vibrate.... 9 times out of ten, its an eletric razor.  But....every once in a while.....

Fri, 06/11/2010 - 11:11 | 408159 Bam_Man
Bam_Man's picture

Even if it is starting to look like "used Charmin", J-CT's balance sheet still looks a lot better than Ben Shalom's.

Fri, 06/11/2010 - 11:11 | 408163 Zina
Zina's picture

Relax... FIFA World Cup just begun!

Fri, 06/11/2010 - 11:14 | 408175 exportbank
exportbank's picture

A government leader that mumbles the truth won't be a government leader for long. 

Luckily, we're never burdened with reality here. All those people getting older are just a pesky nuisance anyway - stop giving them their SS and make them pay for every facet of health care once they turn fifty.


Fri, 06/11/2010 - 11:19 | 408184 doomandbloom
doomandbloom's picture

naah....this is just fear mongering amongst green shooters :)

someone will be there to bailout Japan...

Fri, 06/11/2010 - 11:19 | 408185 SDRII
SDRII's picture


Fri, 06/11/2010 - 11:20 | 408188 RobotTrader
RobotTrader's picture

Meanwhile, JGB's are yielding what???


I doubt they are worried....



Fri, 06/11/2010 - 11:27 | 408206 Sudden Debt
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We clearly share the same interests :)

Fri, 06/11/2010 - 11:28 | 408208 MarkD
MarkD's picture

Wait........ what were we talking about?

Fri, 06/11/2010 - 11:45 | 408250 Mr Lennon Hendrix
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Fri, 06/11/2010 - 11:32 | 408219 deadparrot
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I don't know about you, but I'll take a double D over a triple A any day of the week.

Fri, 06/11/2010 - 11:49 | 408259 EscapeKey
EscapeKey's picture

The interest... er, MY interest... erm, what were we talking about?

(Who's that?)

Fri, 06/11/2010 - 12:15 | 408316 chinaguy
chinaguy's picture

welcome back RT, I've missed your market wrap-ups.

Fri, 06/11/2010 - 13:38 | 408497 Zerozen
Zerozen's picture

Who is she?

Fri, 06/11/2010 - 15:36 | 408739 carbonmutant
carbonmutant's picture

Looks like a well rounded portfolio to me...

Fri, 06/11/2010 - 11:23 | 408195 bugs_
bugs_'s picture

A fiatastrophe decades in the making!

Sat, 06/12/2010 - 01:28 | 409421 StychoKiller
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Check out:  http://www.engrish.com

"Hurry up, the cakes!"

Fri, 06/11/2010 - 11:29 | 408203 Segestan
Segestan's picture

keynesian theory is just a front , a new age mouth piece for an age old theory of ...usury. Of course it will fail,  the foot prints are a worn path in the annals of monetary policy.

Fri, 06/11/2010 - 11:28 | 408210 Gordon Freeman
Gordon Freeman's picture

"We now look for the PM's reign of truth to be even shorter than that of his thousands of predecessors during the past couple of years"

Naoto Gone...

Fri, 06/11/2010 - 11:29 | 408211 Running on Empty
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Explains it all, growth period is unsustainable.

Fri, 06/11/2010 - 12:12 | 408307 EyesWise Shut
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Excellent movie, brilliant, thanks a lot.

Sat, 06/12/2010 - 04:39 | 409487 thisandthat
thisandthat's picture

Video is a eugenics tool: pop growth follows resources' availability - when these grow, population grows; when they decrease, pop decreases - it's just strategy of fear disguised as "concern", same as with "global warming", tbtf, "terror", etc.

Sat, 06/12/2010 - 10:27 | 409611 Running on Empty
Running on Empty's picture

Your just pissed because your not " Eugenicaly" qualified.Tell me how it works out for you.

Some the stupidest comments come from some of the smartest people.

Sat, 06/12/2010 - 18:17 | 409891 thisandthat
thisandthat's picture

Some the stupidest comments come from some of the smartest people.

lmao, dude - that was a smart comment, if I ever saw one ;)

Your just pissed because your not " Eugenicaly" qualified.

Did you're qualification include you're spelling ability?

Fri, 06/11/2010 - 11:32 | 408221 Ripped Chunk
Ripped Chunk's picture


No, that can't be possible? 

Fri, 06/11/2010 - 11:33 | 408222 Nihilarian
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ZH should take a cue from Fark.com and start adding a ",Hilarity Ensues" to the end of their titles.

Fri, 06/11/2010 - 11:34 | 408227 suteibu
suteibu's picture

Hey...Japan has Richard Koo.  What could go wrong?

Fri, 06/11/2010 - 11:40 | 408243 Lux Fiat
Lux Fiat's picture

It will be interesting to see how the majority of the Japanese populace take Kan's opening to a wake-up call.  We need more politicians willing to do the same here. 

However, if more did come forward, would the bulk of the American populace listen and get serious, or would they put their fingers in their ears and go "la, la, la, la...everything is just fine....la, la, la...".  Politicians and MSM aside, our capacity for self-delusion is tremendous, particularly when it is a message that seems scary or something we don't want to hear.

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