Largest Central Banks Now Hold Over 15 Trillion in Fictitious Capital

ilene's picture

Russ focuses on Japan's problems in this article, but Japan's not alone when it comes to the list of countries with ponzi-like financial systems. ~ Ilene 

Largest Central Banks Now Hold Over 15 Trillion in Fictitious Capital

Courtesy of Russ Winter of Winter Watch at Wall Street Examiner  


I could not help noticing that China’s imports from Japan fell 16.2pc in December. Imports from Taiwan fell 6.2pc.  The strong yen strikes again: Honda decides to build a high-performance hybrid Acura in Ohio – instead of its home nation of Japan. The firm’s continued shift in production to North American capacity signals a wider trend of Japan’s automakers to battle currency-related losses by moving operations.

Japan is on life support. The largest buyers of its debt are now sellers.  Japan Post Holdings holds almost 3 trillion dollars of JGB’s and GPIF, the retirement fund, holds over $1 Trillion of JGB’s. Japan Post is the largest financial institution in the world and has 75% of assets in JGB’s and now wants to diversify. The retirement fund is liquidating $80+ billion per year to pay out benefits. I just read that the banks across Japan have 25% of assets in JGB’s. If rates were to move 1% (double), what would be the impact to the capital of the banks?  

One argument is that Japan's banks are going to step in lieu of the big dwindling pensions. I merely point out that the IMF is go to stress test the banks against a modest move higher in rates. That would discourage the banks from buying debt at current levels. 

The insurance companies are big holders and the people are getting old and dying. The savings rate is at 2% and headed negative (also demographics). The trade surplus has turned to deficit. The budget for this year was to have more JGB issuance than government revenue (about 50% of spending to be borrowed), then the earthquake hit. There are projections that the end total may approach two thirds of total spending that will be borrowed for the current fiscal year. There are no new large buyers to replace the ones mentioned above, and to sell bonds outside of Japan would require much higher rates. The Japanese people have trusted their financial institutions to the government and the trust has been violated.  The money is gone and the government is not fiscally responsible. This party is about to end.  John Mauldin called Japan, “A bug looking for a windshield” and Kyle Bass, “A giant ponzi scheme that is running out of time”.

Japan is just one insolvent country; there are others. In tandem, the central banks of these nations hold $15 trillion plus in inflated securities, loans and sovereign securities, in one giant Ponzi pool holding increasingly insolvent debt and "liquidity" loans to banks. As defaults and more credit downgrades gather steam (UK, US, France, Germany and others), the markdowns of these $15 trillion will accelerate. It is important to remember that the capital for central banks is provided by the participating govts. For example, this is who backs the tiny $81 billion ECB capital used to lever 2.75 trillion in "assets." 

When central banks (CBs) expand their balance sheets, they buy securities and accept collateral of securities. As such they take risks, especially when defaults occur. And what is the quality of those securities? 

These charts are actually dated. The CBs own these markets, use thin capital bases, and are going to be handed the losses on the fictitious capital they hold. Tattoo this on your forehead, CBs hold well over 15 trillion in securities and loans to banks of various and often dubious quality, an immense gamble. These are all ultimately the responsibility of the sponsoring country, and represents a monster contingent liability. That will be the end game.

Barry Ritholz has each CB chart.

Check out Russ’s premium service, Russ Winter’s Actionable. Click here for information.  

Pic credit: Banksy (See more Banksy pictures here, via Bruce Krasting)

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Mr Lennon Hendrix's picture

Which story?

The one that we have celebrated Spring for tens of thousands of years because we recognize it is once again a time of bounty?

Or that the Illuminatti likes to use all of our past celebrations to bastardize our spiritual beliefs?

jesse livermoore's picture

gold and silver bitches

Cult of Criminality's picture

Largest Central Banks Now Hold Over 15 Trillion in Fictitious Capital

Thanks for the article Ilene,Russ
Title pretty much sums up the article in eleven words........You made me laugh again.

It also reminds me of the song by 'Aldo Nova'
Life is just a fantasy

It seems difficult to me to, enter this new world paradigm of reverse reality.
You can digitize money forever with no consequence.
The Justice department is doing its job.
Black is white
Radiation is now good for you
There is no weather modification
ATF does not run guns
aspartame is good for you
aluminum oxide is good for you
Monsanto does not hire hit men
Bp completely cleaned up the Gulf
Exxon completely cleaned up Alaska
The new world orders example of life as it should be experiment like, the Euro Nations is and has been working fine.
Barium is good for you.
The government wants to help you, an individual working class individual.
We do not overthrow governments

As you all here know I, could go on for years on what tptb say and what we all perceive as reality.It does not match up and will not....


Try as they might

We appreciate your work and research ZH

DaveyJones's picture

Monstanto's seeds are their hit men

Cult of Criminality's picture

Or Round Tuits ?

When I was a young lad ,My father would ask me to do something I, would say Dad,when I get around to it.

One day he came home with a pocketfull of wooden rounds with 'TUIT' Stamped on them. when I tried the, when I get a round to it, he said Here as he handed me the pile.

now you have a whole bunch, put your ass in gear and get to it !

Cheers to all !

The Alarmist's picture

Yeah, I got a few of those Round-Tuit's too, until I got the point. Then I started to get an actual cash (albeit fiat) allowance.

nah's picture

future money should be made out of pie graphs

jesse livermoore's picture

nope new money will be made out of gold

User 3461's picture

Should be. But I expect an interim coining of plastic nickels, dimes & quarters. I mean - literally - little chips of plastic. It "will save $millions" the freaks will instruct us; in a debt star of $100s of trillions.

Non Passaran's picture

No need to expect, just look at Canada and their new steel dollar :-)

Pemaquid's picture

Hopefully, it is stainless.

e2thex's picture

I was hoping all the denominations would be in different colors.

I'm going to build hotels on Marvin Gardens and Boardwalk.