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A Historic First: Bank Of Japan Monetizes Debt At Negative Rates

Tyler Durden's picture




 

First, Europe infamously shifted to a NIRP and now Japan has begun NIRP monetization. As WSJ reports, Tuesday marked another milestone in the topsy-turvy world of monetary easing in Japan: The Bank of Japan bought short-term Japanese government debt at a negative yield for the first time. In the understatement of the decade, one Japanese bank strategist noted, "The BOJ probably didn't expect this would happen, and T-bill rates staying negative should be a cause of concern for them." The BoJ's decision to scoop up these negative-yielding bills appears to confirm they will meet the QQE-buying demands no matter what the cost (to the Japanese people). The bottom line, the Bank of Japan is now implicitly issuing debt to the Japanese Treasury.

 

As WSJ reports,

The BOJ scooped up some of the three-month No. 477 Treasury bill, which has traded at a negative yield for the past two trading days amid strong demand, the market participants said.

 

...

 

Traders said the bank wanted to show the market that it would meet its asset purchase goals–literally at whatever the cost.

 

...

 

Market participants say the bank probably didn’t foresee buying Japanese debt at negative yields. But the European Central Bank’s easing has created demand for short-term Japanese debt from European investors, to the extent that interest rates have turned negative.

 

“The BOJ probably didn’t expect this would happen, and T-bill rates staying negative should be a cause of concern for them,” said Shogo Fujita, chief Japan bond strategist at Merrill Lynch Japan Securities Co.

*  *  *
So, in summary, normally, people who buy debt expect to get their money back plus some interest. Negative yield means the buyer gets back less than he or she puts in.

In other words, the Bank of Japan is now ISSUING debt TO the Japanese Treasury.

 

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Tue, 09/09/2014 - 20:59 | 5200143 zorba THE GREEK
zorba THE GREEK's picture

Smoke and mirrors

Tue, 09/09/2014 - 21:05 | 5200171 I MISS KUDLOW
I MISS KUDLOW's picture

jim cramer has been saying all week on his cnbc commercials for his show that the "united states is a great place to invest cause all of the worlds dollars are now coming here to invest"  AKA HYPERINFLATION but of course he doesnt say that, what a friggin psycho path

Tue, 09/09/2014 - 21:12 | 5200201 Salah
Salah's picture

Japan GDP contraction just revised to greater than 7%

http://www.japantimes.co.jp/news/2014/09/08/business/economy-business/gd...

Tue, 09/09/2014 - 21:19 | 5200234 remain calm
remain calm's picture

Is this analogous to Japan being a hermaphrodite. That is Japan gets to fuck itself all it wants.

Tue, 09/09/2014 - 21:21 | 5200241 Publicus
Publicus's picture

It's just a bunch of digits in a computer. No need to slave over it.

Tue, 09/09/2014 - 21:43 | 5200328 COSMOS
COSMOS's picture

How did the bank of Japan not end up with a member of the Red Shield running its central bank?

Tue, 09/09/2014 - 21:54 | 5200365 max2205
max2205's picture

I can't believe I am reading this.

It all Japanese to me......oh crap, Forward!

Tue, 09/09/2014 - 22:30 | 5200497 Not My Real Name
Not My Real Name's picture

Please ... do not worry.

Tue, 09/09/2014 - 23:22 | 5200642 flacon
flacon's picture

"Treasury" LOL! Where's the TREASURE?!

Wed, 09/10/2014 - 03:31 | 5200908 zhandax
zhandax's picture

"Smoke and mirrors"  Smokers, tokers, and jokers is more like it..

Wed, 09/10/2014 - 04:49 | 5200955 conscious being
conscious being's picture

COSMOS - How did the bank of Japan not end up with a member of the Red Shield running its central bank?

Their Fed has their gollum, Uncle Sugar by the throat and Sugar in turn, has the Japanese by the balls. So yeah, they've got it covered.

Wed, 09/10/2014 - 04:36 | 5200947 Ploutos74
Ploutos74's picture

Tentacle porn?

Tue, 09/09/2014 - 22:47 | 5200567 Hal n back
Hal n back's picture

what's the big deal--this i sno dofferent than the high inflation rates of the 70's when you could not save enough or earn enough to buy a house since they were going up 2% a month.

 

I remember going to buy our first house and walking in the Levitt model in a sunday morning. I started asking questions of the salesperson about moving electrical outlets. He said they do not do it and to turn around and look at the lines forming. He reminded me of their policy of raising prices 2% per month. Looked at my wife and on a 60k home that was 1200 a month and we could not afford to wait.

Hence, we could no thoard our money and had to spend. FAst forward to today--with a twist--negative interest rates and moderate inflation, but now in Eurozone and Japan, and prob soon here you pay to keep money in banks, the ultimate insult. We know the banks are not fully liquid nor is FDIC and thus we wil be foreced to buy hard assets OMG--might that be PM or wil it be houses that are also depreciating? Well, how many kids can afford a house or even have cash. Once again the seniors get screwed.

I got the feeling that we are nearing the end which wil be started by some sort of mistake/miscalculation  in the economy or finance area.

 

 

Tue, 09/09/2014 - 21:00 | 5200149 tawdzilla
tawdzilla's picture

NIRP bitchez

Tue, 09/09/2014 - 21:09 | 5200197 Kirk2NCC1701
Kirk2NCC1701's picture

Purple NIRPles, bitchez!

Squeal!  Squeal like a pig!

Tue, 09/09/2014 - 21:58 | 5200384 max2205
max2205's picture

How negative should rates go before it's a good short.....

Can't wait

Tue, 09/09/2014 - 22:56 | 5200585 Kirk2NCC1701
Kirk2NCC1701's picture

And at what point is a Short a Wedgie?

They'll be singing like the Bee Gees, just to be Stayin' Alive, stayin' alive.

Tue, 09/09/2014 - 21:01 | 5200153 zorba THE GREEK
zorba THE GREEK's picture

I wish I could borrow money at negative interest.

It's a no brainer

Tue, 09/09/2014 - 21:36 | 5200296 Bangalore Equit...
Bangalore Equity Trader's picture

Listen. I wish I could "PRINT" my cash requirements direct from my HP laserject! AND NOT GET ARRESTED.

Wed, 09/10/2014 - 00:21 | 5200734 F0ster
F0ster's picture

No shit, borrowing at neg interesting is awesome. I'm going to call the Fed Reserve tomorrow and ask to borrow a quadrillion dollars for 30 years at a neg rate. My payments will be on time I promise. I gonna be rich biatches!!

Tue, 09/09/2014 - 21:03 | 5200160 zorba THE GREEK
zorba THE GREEK's picture

I'll gladly pay you less Tuesday for a cheeseburger today.

Tue, 09/09/2014 - 21:03 | 5200164 Grande Tetons
Grande Tetons's picture

But but but Gold has no yield! 

I need a vacation. A lonnnnnnnng vacation. 

Tue, 09/09/2014 - 23:58 | 5200708 angel_of_joy
angel_of_joy's picture

Zero sounds better than negative...

Tue, 09/09/2014 - 21:03 | 5200166 Yancey Ward
Yancey Ward's picture

You ain't seen nothing yet.  Things will get increasingly ridiculous until we just literally laugh ourselves to death.

Tue, 09/09/2014 - 21:04 | 5200168 Notsobadwlad
Notsobadwlad's picture

If your you and your country was held ransom by psychopathic mad-bankers and that you were told that Fukushima was only a taste of what to expect if you do not comply ... most likely you would capitulate, thinking ... "for a time, we can abide."

... and so the Japanese abide the insults and humiliation because it is only temporary.

Tue, 09/09/2014 - 21:05 | 5200172 Al Huxley
Al Huxley's picture

This will be the solutions to Japan's budget deficit, and eventually their debt.  If they increase their debt by a large enough amount, they will eventually earn enough interest on it to pay it off.

Tue, 09/09/2014 - 21:11 | 5200202 NoDebt
NoDebt's picture

Stop.  Stop.  You're making my head explode.

Please, no more.  Blue Pill, STAT!  I'm done.  I want back into the Matrix.

Tue, 09/09/2014 - 22:40 | 5200542 walküre
walküre's picture

You're almost correct. They issue debt at negative rates and buy the debt and pay interest to the debt issuer, their own government. Of course they print twice now. Once to buy the new debt and then again to pay the government to service the debt. Eventually the government of Japan will be wealthier as it "earns" revenue by issuing debt that BOJ must keep buying!

Genius! Why didn't I think of this sooner! I'm going to pay myself to take out more debt and will give the banks both middle fingers!

Wed, 09/10/2014 - 08:20 | 5201166 Againstthelie
Againstthelie's picture

The government issues the new interest free debt, earns the money and pays back the older debt carrying interest. The same reason why share buybacks were soaring - interest on outstanding shares (dividends) are more expensive than issuing new debt and buying back shares.

 

And we should also not forget, that the more debt the central banks hold, the easier the solution of the debt problem becomes: make the debt in the CBs balance sheet vanish with a simple law.

And that would not necessarily mean exploding interest rates, if the privately held debt is excluded. In fact the market would even appreciate it, since he receives his interest payments, while only the CB-owned debt vanishes.

 

Prepare accordingly.

Tue, 09/09/2014 - 21:04 | 5200174 The_Prisoner
The_Prisoner's picture

Full retard! It must be the Cesium.

Tue, 09/09/2014 - 21:23 | 5200249 disabledvet
disabledvet's picture

More like Strontium 90.

Tue, 09/09/2014 - 21:04 | 5200175 nmewn
nmewn's picture

At some point it'll cost more in ink & paper than the value of the stupid note...lol...but for now...

Banzai! Over the qwiff!!!

Tue, 09/09/2014 - 21:07 | 5200182 bigrooster
bigrooster's picture

Kyle Bass where are you?  

All please get in on this early!  Send your money to my paypal account and in one year I will give you LESS money back!  This is the new money making system (for me).

Tue, 09/09/2014 - 21:07 | 5200184 Son of Captain Nemo
Son of Captain Nemo's picture

Where do we sign up?

For the toilet paper!...

Tue, 09/09/2014 - 21:24 | 5200206 ekm1
ekm1's picture

Which means absolutely nothing as far as real economy

 

Central bank and treasury dept are two cubicals in the same office.

 

Just two computers that move money back and forth. It's nothing

 

What matters are the gambling swaps off the interest rates that recycling money for bonds between treasury and central bank set.

This is constant recycling to keep rates low so swaps don't implode.

 

Japan parliament may as well abolish either treasury or central bank or merge them both.

That being said, US could do the same thing. At zero % who needs a central bank. Just type in digits on computers, reserve based economy, not credit based economy

Tue, 09/09/2014 - 21:38 | 5200291 ekm1
ekm1's picture

Hmmmmmmm???

Let's assume "negative yield" is 20%

 

That would mean 20% reserve extinguishing.

Hmmmmmm................Interesting

This is another way to extinguish excessive reserves

I find this fascinating

Tue, 09/09/2014 - 21:38 | 5200310 mademesmile
mademesmile's picture

Interesting concept. How is this different then 20% interest rates?

Tue, 09/09/2014 - 21:44 | 5200326 ekm1
ekm1's picture

When central bank sells bonds and receives reserves (cash), then reserves disappear. Central bank is like blackhole for reserves.

 

So, at positive 20%, 20% more reserves (dollar or yen or any currency) will be added to the principal

 

At negative 20%, the opposite. it will be deducted from the principal.

Central bank is a blackhole for reserves

Tue, 09/09/2014 - 21:53 | 5200347 mademesmile
mademesmile's picture

My perspective is from the person hilding the cash.

At 20% interest rates holding cash means you get $80,000 of purchasing power a year later.

At 20% negative rate means you have $80,000 in currency a year later.

These could be the same thing.

 

edit: my mistake is conflating high interest rates with high inflation. While they are usually linked, our current economy is an example where they most definatly are not. Milk is now $4.89 a gallon yet my credit union just offered me the stunning rate of .25 percent a year!

Tue, 09/09/2014 - 22:11 | 5200434 ekm1
ekm1's picture

So BOJ buys 100 yen bond by creating 80 yen out of nothing, negative 20% interest.

 

BOJ added 80 yen of reserves into the system

 

BOJ holds bond to maturity and gets 100 yen out of the system (into a blakchole)

 

Final: added 80 yen, extinguished 100 yen, 20 yen gone

Tue, 09/09/2014 - 22:38 | 5200531 ThroxxOfVron
ThroxxOfVron's picture

You still seem to believe that reserves are being destroyed as the written rules would seem to dictate.

I would argue that without proof of the reserves being removed/destroyed that it is as or more likely that the reserves are going to a new life in unregulated black ops. rather than going to die the regulatory black hole.

Tue, 09/09/2014 - 22:46 | 5200547 ekm1
ekm1's picture

This is the law.

Fed is a blackhole. It is the law

 

This has got nothing to do with belief or faith.

That is the law in every credit based country of the world. That is how every credit based system works

Tue, 09/09/2014 - 22:45 | 5200564 ekm1
Tue, 09/09/2014 - 22:53 | 5200580 ekm1
ekm1's picture

For black ops there is no need to extinguish anything. They just make it up on a computer.

 

Whether they are destroyed or not is very easy to see:

Derivatives still standing? Then not destroyed

Derivatives collapse? Then destroyed

 

Easy peasy

Wed, 09/10/2014 - 04:59 | 5200960 conscious being
conscious being's picture

Then why do they need all those poppy fields? Why not just print up the proceeds and skip the poppies??

Wed, 09/10/2014 - 07:48 | 5201103 ekm1
ekm1's picture

people want to get paid

other people want to consume poppies

Wed, 09/10/2014 - 09:05 | 5201322 saveandsound
saveandsound's picture

Actually BOJ buys a 100 yen bond for 102 yen created out of thin air. At maturity BOJ gets 100 yen back.

This will end well, please... do not worry.

Wed, 09/10/2014 - 09:55 | 5201564 ekm1
ekm1's picture

that is positive rate

We're talking negative rates

Tue, 09/09/2014 - 22:05 | 5200415 OC Sure
OC Sure's picture
"Which means absolutely nothing as far as real economy. Just two computers that move money back and forth. It's nothing"

    Doesn't it mean everything to the economy? Where does the counterfeit go after the government gets it?

    Think of it this way. Remove the debt component from the transaction to simplify the event. The debt component is just a time delay of the exchange. The event is that of counterfeiting and theft from the economy. If the bank is conjuring the currency and then it is 'given'' to the "government" that then exchanges the counterfeit for items produced in the economy,  this steals from the economy and thus 'monetary easing' is a lie and the process is no more an injection of money into the economy than it is an injection of productive work into the economy. It is this excessive 'stimulus,' stealing from the production that is already there, that translates into decreasing production instead of increasing production. There can be no "real" economy any more than there can be a "fake" one. It is all one economy and there is either an exchange of productive work performed or theft from productive work performed. The ruse of 'extinguishing reserves' is that this can only be done long after the theft has already happened.

     
Tue, 09/09/2014 - 22:15 | 5200456 ekm1
ekm1's picture

Oh, I meant to focus on 'negative rates'. The word 'negative' was at the centre of the comment

 

As far as creating excess reserves I absolutely agree. It kills the real economy by design.

Tue, 09/09/2014 - 22:34 | 5200502 OC Sure
OC Sure's picture
But if you remove the debt component entirely from the event, then the level of the rate is irrelevant to the process as I have described above. If you do consider the debt and the level of interest goes 'negative,' then the cost of facillitating the theft is only shifted from one thief to the other. Changing the origin of that cost won't change the event from the victim's perspective as their participation in it is unchanged.

Tue, 09/09/2014 - 22:37 | 5200507 ekm1
ekm1's picture

Correct.

That's why I say, zero interest rates of negative rates convert the economy from credit economy to reserve based economy, like communism.

 

Fed is buying crap assets or inexistent assets existing on paper only in order to supply reserves to primary dealers or major players like Warren Buffett who are insolvent due to derivative losses.

 

Having access to reserves in trillions, then insolvent bank lobby oligarchs are trying expropriate solvent oligarchs from oil, copper, gold etc assets. Hence intra lobby civil war, oligarchs civil war going on right now

Wed, 09/10/2014 - 05:16 | 5200967 conscious being
conscious being's picture

Well done ekm.

Having access to infinite fiat, insolvent bank lobby oligarchs are trying to expropriate solvent oligarchs from oil, copper, gold etc. while they can still bamboozle the rubes or just kill them and take their stuff ie. Gaddafy.

 

If you don't fight back, your stuff's all gone and you're holding worthless coupons.

Wed, 09/10/2014 - 07:50 | 5201105 ekm1
ekm1's picture

"worthless coupons" is a great way to put it.

And yes, there will be assassinations unless bank lobby surrenders in peace.

Wed, 09/10/2014 - 08:41 | 5201215 OC Sure
OC Sure's picture

"Correct.

That's why I say, zero interest rates of negative rates convert the economy from credit economy to reserve based economy, like communism.

 

Fed is buying crap assets or inexistent assets existing on paper only in order to supply reserves to primary dealers or major players like Warren Buffett who are insolvent due to derivative losses.

 

Having access to reserves in trillions, then insolvent bank lobby oligarchs are trying expropriate solvent oligarchs from oil, copper, gold etc assets. Hence intra lobby civil war, oligarchs civil war going on right now"

 

I understand this more so than your first comment above. Thanks.

I still like to identify those "reserves" as counterfeit though and not insinuate that there is any money (productive work valued by natural demand) involved with respect to the initiation of the "monetization" process.

Those "reserves" represent someone elses productive work and not any productive work from the ones who benefit from them.

 

The oligarchs are stealing value from the exchange as counterfeit can only do and not introducing value to the exchange as money would necessarily do.

Wed, 09/10/2014 - 09:57 | 5201571 ekm1
ekm1's picture

When commercial banks creates reserves monetizing output, is bonafide reserves.

When Fed does it by giving them to insolvent bank lobby oligarchs, it is counterfeit money

Wed, 09/10/2014 - 11:54 | 5202046 OC Sure
OC Sure's picture

I think we are on the same page, ekm1, however, commercial banks would be monetizing what is input to them and then output by them in this manner: money, productive work from the economy is put in to the bank and then the bank can monetize this by putting (lending) it out. That is, the bonafide reserves must be represented by full value and not fractional value. Is that what you mean? I explain it in greater detail here as full value vs fractional value. http://ocsure.blogspot.com/2014/08/full-reserve-banking-trounces_89.html

Tue, 09/09/2014 - 21:12 | 5200207 Uber Vandal
Uber Vandal's picture

Mommy, is it true that at one time, you got paid NO interest on savings or checking?

Yes son, at one time, you even got all of your money when you cashed a check too, not less a check cashing fee, or an ATM fee, or debit card fee.

Tue, 09/09/2014 - 21:16 | 5200214 ebworthen
ebworthen's picture

I just knew Japan was up next from the debt pitcher bull pen.

Vaseline on the ball, Abe?

Tue, 09/09/2014 - 22:50 | 5200574 The_Prisoner
The_Prisoner's picture

Abe is about to have a new case of diarrhea. Any moment now.

Tue, 09/09/2014 - 21:14 | 5200219 Yen Cross
Yen Cross's picture

  Welcome to the unintended consequences of central banking. If demand was so high for the debt, why didn't BoJ just pass on the purchase option?( overkill much? They must be pretty fucking scared of things getting out of control)

  If I have a gun in my hand and tell someone I'm going to shoot them, I'm pretty sure they would take me at my word and STFU. (I don't have to pull the trigger to make my point)

Tue, 09/09/2014 - 21:19 | 5200233 Grande Tetons
Grande Tetons's picture

Unless you are holding a water pistol. 

Tue, 09/09/2014 - 21:21 | 5200242 Yen Cross
Yen Cross's picture

  This is true. :-)

Tue, 09/09/2014 - 21:25 | 5200255 disabledvet
disabledvet's picture

What if it's a a Super Soaker?

Tue, 09/09/2014 - 21:27 | 5200264 Grande Tetons
Grande Tetons's picture

YC,  This is beyond fucked up. Fucked up implies a reversion to the mean. This implies more fuckery. 

Tue, 09/09/2014 - 21:31 | 5200286 Yen Cross
Yen Cross's picture

   I'm sure Mr.Yellen is taking notes.

Tue, 09/09/2014 - 21:37 | 5200305 Grande Tetons
Grande Tetons's picture

I think you are right. She will need to hose down the USD at some point. 

Tue, 09/09/2014 - 21:24 | 5200257 Kaiser Sousa
Kaiser Sousa's picture

fucking morons...
remember these r the same mother fuckers who in futile desperation required their pilots to fly their planes into ships...
the japanese r some arrogant mother fuckers who have a hard time accepting the reality of defeat...
its that pride thing...
just sayin...

Tue, 09/09/2014 - 21:30 | 5200279 Grande Tetons
Grande Tetons's picture

LOL. Good luck, my friend, we are all going to need it from here on out. 

Tue, 09/09/2014 - 21:26 | 5200261 JPMorgan
JPMorgan's picture

Japan is a complete basket case, what else is there to say.

Tue, 09/09/2014 - 21:48 | 5200348 COSMOS
COSMOS's picture

This is because they are in a very small basket with no natural resources, a major radiation problem, and a huge picnic table called CHINA close by that makes anything you can find in the basket but you get a lot more of it and at cheaper prices.

Tue, 09/09/2014 - 21:26 | 5200262 disabledvet
disabledvet's picture

"The circle is now complete OMG. Once I was but a dipshit like you but now I am Full Retard!"

"Only a Full Retard of balderdash Barf Caper!"

Tue, 09/09/2014 - 21:28 | 5200267 GooseShtepping Moron
GooseShtepping Moron's picture

Go out on a limb

So far that you end up in

A whole other tree.

 "Garth, that was a haiku!"

Wed, 09/10/2014 - 02:08 | 5200274 The_Prisoner
The_Prisoner's picture

AUD is shiting the bed.

Edit: bed-shitting continues...stops being triggered.

Edit 2: Australian media inteprets this as sign UK and US are about to raise rates. Sure they jest.

Tue, 09/09/2014 - 21:31 | 5200276 The_Prisoner
The_Prisoner's picture

.

Tue, 09/09/2014 - 21:33 | 5200289 mademesmile
mademesmile's picture

Who buys a negative yield? Seriously. All Suzie O. talks about is 8 percent a year like that's still the norm now - how about PAYING to save, hows that gonna work out?

Tue, 09/09/2014 - 22:47 | 5200509 hobopants
hobopants's picture

ECB printing faster than BOJ, so negative rate JGB actually yields more in the form of real returns than Euro bonds? That's the only way I can see anyone would want this crap, but even then you could just trade the currency itself and spare yourself the hit from the neg rate...

Maybe it fulfils some bizarre collateral requirement I don't know about? I don't know... It's getting harder and harder to keep up with this nonsense.

Tue, 09/09/2014 - 21:42 | 5200323 q99x2
q99x2's picture

Hari Kari is almost as good as jumping off of a building bankster M'Fers.

Tue, 09/09/2014 - 21:46 | 5200325 One And Only
One And Only's picture

The Bank never “ goes broke. ” If the Bank runs out of money, the Banker may issue as much more as may be needed by writing on any ordinary paper.

Bottom of page one:

http://www.hasbro.com/common/instruct/monins.pdf

Page motherfucking numero uno.

 

Tue, 09/09/2014 - 22:41 | 5200543 ThroxxOfVron
ThroxxOfVron's picture

Hasbro's doctoral thesis is a marvel of clever engineering, isn't it?

Tue, 09/09/2014 - 21:48 | 5200341 AdvancingTime
AdvancingTime's picture

 It might soon become apparent the economic efficiency of credit is beginning to collapse and the additional money poured into the system coupled with lower rates can no longer drive the economy forward.  When this happens we are at the end game.

At some point the return on loaning money is simply not worth the risk!  Why do you want to loan money if most likely you will never be repaid or repaid with something that is totally worthless? When this happens the only safe place to store wealth will be in "tangible assets" and the only lenders will be those who print the money that nobody wants.

The collapse of credit can pose major problems such as what we saw when many sellers were forced to demand payment up front before shipping goods in 2008. More on this subject below.

http://brucewilds.blogspot.com/2014/06/the-economic-efficiency-of-credit...

Wed, 09/10/2014 - 10:30 | 5201710 Its_the_economy...
Its_the_economy_stupid's picture

Because Bankster make their chips on the origination of the loan. Then they pawn off the crap on the FED.

Tue, 09/09/2014 - 21:56 | 5200378 starman
starman's picture

Cause debt is the new gold! Get it?

Tue, 09/09/2014 - 21:58 | 5200385 yogibear
yogibear's picture

Japan implodes first,then the US a while later. The US gets to see it's own destruction through Japan.

 

Tue, 09/09/2014 - 22:02 | 5200401 AdvancingTime
AdvancingTime's picture

I agree but some time in beteen we will see the Euro crash in flames. Most likely right after the Yen going down sends fear across all markets.

Tue, 09/09/2014 - 22:26 | 5200485 johnmack
johnmack's picture

i have a thought game for you, if JAPAN goes where do you think  people(especially the Japanese)  will be rushing to put their money into....?

 

 

Tue, 09/09/2014 - 22:39 | 5200530 hobopants
hobopants's picture

In a sane world it would go into Gold and silver, but who are we kidding? It will be plowed into US treasuries allowing us to experience the nirvana of negative rates as well. Yippie.

Wed, 09/10/2014 - 01:17 | 5200816 johnmack
johnmack's picture

TING TING TING WE HAVE A WINNER!

Tue, 09/09/2014 - 21:58 | 5200388 AdvancingTime
AdvancingTime's picture

 Balance is important and like so many things in life when it comes to economic policy it is very important to balance the markets reward when it comes to savings and debt. Savings plays an important role in the economy  and has been shortchanged, this will come back to haunt us. If you live in Japan it is time to get your money out of the country.

The idea of being frugal and living within our means has not been given due credit, living by increasing debt is far too acceptable. When we find it necessary to discuss savings we are back to basics and it is a sign we have strayed far off course in our economic policy. More on this subject in the article below.

http://brucewilds.blogspot.com/2014/09/savings-and-role-it-plays-in-econ...

Tue, 09/09/2014 - 22:07 | 5200422 seek
seek's picture

NIRP in Japan, NIRP in Europe, and a little secret, if you're a saver in the US, NIRP here, too, between inflation and fees. Only a matter of time before the printed rate is NIRP as well in the US.

These here seeds for next year's crop baked a mighty fine loaf of bread!

We're in the short count to disaster. I doubt we make it to 2018 with the system intact.

Tue, 09/09/2014 - 22:10 | 5200432 Yes_Questions
Yes_Questions's picture

 

"buy" debt?

 

"costs"?

 

its a central bank.  these words do not apply.  

 

and anyway: its owner's can afford it.

Tue, 09/09/2014 - 22:15 | 5200443 slightlyskeptical
slightlyskeptical's picture

If you can borrow enough money at negative interest rates then you could theoretically eliminate the debt.

Tue, 09/09/2014 - 22:22 | 5200469 Yes_Questions
Yes_Questions's picture

 

 

 

i was just pondering how this could function as a slow drip jubilee

Tue, 09/09/2014 - 22:24 | 5200474 khakuda
khakuda's picture

If this weren't so f***ed up, it would be fun because intellectually this stuff is endlessly fascinating.  Instead of holding fiat currency, I'm giving up fiat currency now to buy a contract to get back less fiat currency later.  Under what circumstances could that make sense?

Take it to the extreme and say it continues and interest rates eventually go to negative 100%.  I pay currency and get nothing in return.  Certainly that debt isn't an asset I'm buying, it's just a completely worthless black hole.  But maybe that is right since the debt can't be repaid in aggregate anyway other than with what will be worthless fiat currency, it can't be worth much, if anything.  Even still, there are other things I could buy now with currency while it has perceived value.

In a world where Iggys and Karsdashians are considered talented, young muslims want to fly into buildings and kill people and central bankers think they can create value by causing capital misallocation, maybe it all makes sense.

 

 

Tue, 09/09/2014 - 23:41 | 5200681 Slave
Slave's picture

It's long past time to understand how fucked things are. All you need to do is prepare your family for the shitstorm.

Thu, 09/11/2014 - 08:30 | 5205633 LostandFound
LostandFound's picture

Lay off the Kardashians man.....my wife will hunt you down

Tue, 09/09/2014 - 22:45 | 5200553 walküre
walküre's picture

How premiums for PHYS are not exploding massively higher is beyond my imagination. What the fuck are people waiting for? The day that they actually need to bring gold or silver to pump gas and buy groceries? Can't be that far off when you consider the price inflation on everything you actually need to live and your household to function.

Wed, 09/10/2014 - 05:29 | 5200974 conscious being
conscious being's picture

There is no real market and there won't be again until the global financial system resets.

 

Wed, 09/10/2014 - 00:22 | 5200605 JasonMacko
JasonMacko's picture

Adding fuel to the burning yen it seems, read a couple of articles pertaining to this, if you opperate in currencies.

The short / medium term - next few months 110.00/111.00 in about 4-5 months

http://www.forexlive.com/blog/2014/09/09/the-technical-case-for-re-estab...

The Long / Term - next few years - get this, 200 in about 3-5 years

http://kylebassblog.blogspot.ca/2013/01/kyle-bass-usdjpy-will-hit-200.html > from last year

http://www.forexlive.com/blog/2014/09/09/gundlach-i-think-usdjpy-is-goin... referenced again today

> Not sure I would leaver up like a retard, but it certainly makes a case for adding to your positions if you are long, and looking for a decent dip to buy on...but no one can read the future with 100% accuracy.

> some information I have added if you play currencies http://forextopsandbottoms.blogspot.ca/2014/09/usdjpy-to-110-and-eventua... via my blog

Tue, 09/09/2014 - 23:57 | 5200702 Bunga Bunga
Bunga Bunga's picture

No matter what the interest rates are, isn't that a zero sum game? Central bank profit from positive rates is paid out to the treasury, it should work the other way round with central bank loss.

Wed, 09/10/2014 - 01:19 | 5200820 YakTrader
YakTrader's picture

We've been paying to borrow money forever and look where that got us.  Bribing people to boorow money from us will be much more popular. It's worth a shot, nothing else has worked.

Wed, 09/10/2014 - 02:07 | 5200854 Spungo
Spungo's picture

At this point, any person still holding yen might literally be retarded. On the other hand, now is a great time to borrow in yen.

Wed, 09/10/2014 - 02:46 | 5200875 unirealist
unirealist's picture

I'm not as smart as the rest of you guys when it comes to this stuff.

But. If their government issues debt at negative 100%/year, and the BoJ buys it all up, then after a year the bonds go to zero, and the government owes the BoJ nothing.

The BoJ created the yen that it used to buy the bonds out of thin air, so now it can erase those yen from their ledger, and it's like the transaction never happened, right?

The BoJ balance sheet goes back to whatever it was, and the government is no further in debt than it was a year ago, even though it spent a lot more than it took in.

Okay, I suppose the money supply grew. But the ratio of debt to GDP stayed the same, so who cares?

And if there's a little inflation, all the better -- that's what Abe wants anyway.

I'm surprised the brainy guys at the Fed haven't already used this trick to keep our Public Debt under control. 

Wed, 09/10/2014 - 03:56 | 5200923 Zgangsta
Zgangsta's picture

1. Take out gymourmous loan.
2. Stash money in mattress.
3. Live off the interest on your debt.

Wed, 09/10/2014 - 04:18 | 5200928 jubber
jubber's picture

and yet another new high for the Nikkei >15850, while HK falls nearly 500 points!... USJPY going nuts fast approachong 107,trying to buoy the US futures.... meanwhile Europe bright red....and Gold and Silver while up overnight get whacked again....Brent at new lows @9876

This does have a feel that things are starting to unravel here, European Bonds again this morning are moving up and Dow barely holding above 17k hit 17002.7 overnight with S&P a low of 1986.3....looking very shaky acroos the board

Wed, 09/10/2014 - 04:36 | 5200948 Global Observer
Global Observer's picture

Quite silly actually. Bank of Japan should buy up treasury debt and write some of it off. That reduces the total government debt, debt servicing burden and deficit.

Wed, 09/10/2014 - 07:07 | 5201054 johnmack
johnmack's picture

its not as simple as buying it up and writing it off, since what they are buying are instruments in future obligations like pensions, and you cant just write off pensions and other future obligations without making the japanese poorer

Thu, 09/11/2014 - 05:51 | 5205440 Global Observer
Global Observer's picture

Those who wish to hold on to the government debt to redeem in future can continue to do so. Those wishing to liquidate the bonds for cash (there are always some doing that, otherwise there won't be any trade in government bonds) can sell them to the Bank of Japan for cash. Bank of Japan tears up the bonds and tells the government that part of their debt is forgiven. Of course their balance sheet becomes unbalanced because the assets are now much less than the liabilities. But that is not a huge problem since then can declare anything to be an asset of any value they please so that they can enter it into their books.

Frankly the central bank periodically buying government debt and forgiving it is good for savers because the government can afford to pay the bondholders a decent rate of return. Negative interest rates on debt will kill savers if they buy it at all; not only will they get no income from holding the government debt, its value at maturity will be less than its current value. Only someone who doesn't care if the debt is repaid i.e. the central bank can afford to buy such debt. Why go through the circuitous route of debt bearing negative interest rates instead of the direct route of debt forgiveness?

Wed, 09/10/2014 - 06:16 | 5201005 jubber
jubber's picture

and if by magic Dow moves up 50 points and the DAX 90, FTSEMIB 275

Wed, 09/10/2014 - 08:08 | 5201138 Mi Naem
Mi Naem's picture

Pay me for the privilege of lending me money. 

Wow, wish I could get a fixed rate mortgage like that. 

Wed, 09/10/2014 - 08:59 | 5201294 hedgiex
hedgiex's picture

Wow...just used a bazooka to blast the Eurobonds. What a fabulous carry trade.

Wed, 09/10/2014 - 09:13 | 5201363 JohnFrodo
JohnFrodo's picture

If you have a trillion dollars of imaginary money would you trade it for a half trillion in half real money? Canada should cash in on this need,

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