"Something Big" Indeed Came - Bernanke's Japan Visit Unveils "Helicopter Money", Sparks Monster Rally

Tyler Durden's picture

When we first heard this past Thursday that private blogger and Citadel employee Ben Bernanke was going to "secretly" meet with both the BOJ's Haruhiko Kuroda and Japan PM Abe, we warned readers that "something big was coming."

As noted late last week, "Bernanke will be in Japan next week. It has been arranged for him to meet officials including Abe and Bank of Japan Governor Haruhiko Kuroda, according to a government official speaking on condition of anonymity. Bernanke is expected to discuss Brexit and the BOJ's negative interest rate policy with Abe and Kuroda, the official said." Reuters also added that "some market players speculate Kuroda might decide, in a surprise, to provide "helicopter money."

We concluded as follows:

So is it time? Is Bernanke about to unleash the next, and final, monetary policy evolutionary step, one which launches "helicopter money" in Japan, and if successful, brings it across the Pacific to the US?

 

We don't know, but if anyone is still holding on to USDJPY shorts, now may be a good time to quietly close them out, because if Reuters is right, and a "helicopter money" is about to be served for the first time in modern history, things are about to get very volatile, very fast.

Two trading days later, Japan's stocks have soared by 4% - the biggest one day gains since February - and the USDJPY is more than 200 pips higher...

 

... after something big indeed came overnight from Japan: nothing less than the first "lite" instance of helicopter money .

First, this is what Reuters reported overnight:

Ben Bernanke, a former Federal Reserve chairman, visited the Bank of Japan on Monday, according to a Reuters witness. Government sources told Reuters on Friday that Bernanke, who steered the United States through its worst financial crisis in modern times, would meet with Bank of Japan Governor Haruhiko Kuroda and Prime Minister Shinzo Abe this week. Reuters was not immediately able to confirm whether Bernanke met with Kuroda. Last week government sources said Bernanke was expected to discuss Britain's vote to leave the European Union and the BOJ's negative interest rate policy.

It would appear that something else discussed was the first iteration of helicopter money, because the catalyst that sent both the Nikkei soaring and the Yen tumbling, was not so much Kuroda's whirlwind victory in Japan's latest election - largely as expected - but Abe's announcement that he may proceed with launching a JPY10 trillion stimulus, funded by Japan's first new major debt issuance in four years. From Bloomberg:

The Topix jumped 3.8 percent to 1,255.79, its largest advance since Feb. 15, as Abe said he will order the preparation of an economic stimulus package tomorrow. A person familiar with the matter said Bank of Japan Governor Haruhiko Kuroda met with former Federal Reserve Chairman Ben S. Bernanke over lunch in Tokyo on Monday, also boosting speculation for easing. Japan stocks further benefited as better-than-expected U.S. payrolls helped spur a global equities rally.

 

“With hopes that stimulus will come earlier than expected, investors are seeing it as an opportunity to buy,” said Hiroaki Hiwada, a Tokyo-based strategist at Toyo Securities Co. The report on Bernanke’s visit “makes it natural for speculation to emerge on additional easing.”

 

Abe will hold a cabinet meeting on economic measures on Tuesday and consider more than 10 trillion yen ($98 billion) in stimulus, the Nikkei newspaper reported. Following the meeting with Kuroda on Monday, Bernanke will meet with Abe tomorrow, Reuters reported.

 

“It’s positive for stocks that the ruling party has won so many seats,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Research Center. “History shows that when the ruling party wins the upper house, Japanese stocks are stronger afterwards.”

Bloomberg adds the following, when reporting on Shinzo Abe overnight speech in Tokyo, a day after winning an increased majority in upper house elections.

  • Want to make most of zero interest rate environment to utilize fiscal investments
  • Economy stimulus to establish 21st century infrastructure; speed up construction of high-speed train lines
  • Will consider size of economic measures from now
  • Measures to support domestic demand

However, it is not just as $100 billion fiscal expansion coming out of Japan: it comes in conjunction with an imminent expansion of even more BOJ monetary stimulus: "The Bank of Japan is set to announce an expansion of its monthly bond and equity purchases on July 29 and Abe will probably introduce fiscal stimulus by year-end, according to Macquarie Bank Ltd."

So is this the start of "helicopter money"? It would appear so.

Here is the broadest definition of the term from Jefferies: "The important distinction of helicopter money compared to QE or conventional deficit financing is that it is a combination of extreme monetary easing and fiscal relaxation."

More from a just released note by Jefferies' Sean Derby titled "Japan: An Equity Investor's Guide To Helicopter Money" (we will say more on this later):

We believe Japan is closer to introducing helicopter money than consensus believes as the tapering of its JGB purchase program forces the BoJ to seek other routes to stimulate growth. Although the BoJ could accelerate buying of asset classes, there are worries over diminishing returns. Moreover, negative interest rates on deposits is deeply unpopular amongst the banks and seems to have been ill thought out.

 

 

* * *

‘Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated’, Milton Friedman, The Optimum Quantity of Money

 

‘People know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation’, Ben Bernanke

 

‘In this sense, we continue to believe that the BoJ’s sudden policy U-turn on negative deposit rates in January was driven by the need to collapse the yield curve into negative territory as far as possible. The authorities are attempting to push bond yields down below existing nominal GDP, so that the existing debt can be converted or ‘consolidated’ into a perpetual zero coupon bond presumably before any ‘tapering announcement’’, Japan: It's Time To Launch A Zero Coupon Perpetual JGB! (II), 6th April, 2016

 

‘With real rates negative, the government can finance its outstanding debt without penalty. It could then write off some of the debt held by the BoJ by announcing that the excess reserves used to purchase the bonds would remain on the BoJ’s balance sheet forever while the reserves would pay no interest. Effectively, the liability (NPV) would be worth zero. This would give the government a clean slate to increase spending or cut taxes', Japan: Moving the Goalposts (IV)

 

At the end of the day, most central bank mandates is devoted to price stability. Deflation in the extreme cases epitomizes falling prices, declining wages and a lack of demand. In order to overcome this ‘nightmare’ scenario, an expansionist policy would need to combine both fiscal and monetary policy. The important distinction of helicopter money compared to QE or conventional deficit financing is that it is a combination of extreme monetary easing and fiscal relaxation.

Which, incidentally, is precisely what Japan is now planning to do, and in doing so, it has given the world a glimpse of not only how "helicopter money" will look, but also the market's enthusiastic response, which needless to say is music to the ears of central bankers everywhere.

So well done, Blackhawk Ben: while you never managed to unleash helicopter money in the US, you finally succeeded in bringing it to Japan which will now be a trial balloon for the rest of the world: if it works, expect many more instances of "extreme monetary easing coupled with fiscal relaxation" around the globe, just as Russell Napier previewed yesterday.

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silverer's picture

Let's celebrate helico... oops! I mean hyperinflation.

greenskeeper carl's picture

Fuck these people. Seriously. Im so sick of this shit. Every time they don't get the results they want, they double down on the same failed ideas. Like Bernanke is some kind of wunderbanker. How fucking hard is it to lower interest rates to zero and print money. A fucking trained ape can do that.

 

Oh well, coming to America in the next few years. We are Japan 2.0

Memedada's picture

“The same failed ideas”? Failed for whom? The 0,01% are enjoying a bonanza of free fiat (that they quickly reinvest in tangibles – that’s why there’s already hyperinflation in art, luxury cars/homes, yachts, vintage jewelry and everything that only the 1%’ers can buy)!  

JamesBond's picture

Bernanke:  "We are not going to monetize the debt."  "Well, the US debt that is.  Japanese debt is totally up for grabs."

MillionDollarBonus_'s picture

I believe we are in a global recovery, but we still need something to kick the economy into high gear. Fiscal and monetary stimulus brought our economy from the brink of destruction to where we are today, so why would anyone think we should stop now? As an additional measure, I recommend making mortgages more attractive to young people as many of them are struggling with college debt and afraid to get themselves into more debt. If we offer extremely low interest loans with no down payment or stringent income requirements, we can entice a new generation of home buyers and help maintain real estate prices. Real estate cannot be allowed to fall, as for most Americans, their home is their greatest asset.

WHY WE NEED A WAR WITH POLICE

 

nope-1004's picture

Why is a former head of a privately run domestic banking cabal meeting with foreign leaders?

The Fed is a private institution under no mandate from .gov and does not answer to .gov.  Why did Bernocchio need to go and meet the President of another country?

 

Kind of obvious that the entire world has been financialized by these whores.  Time to start a NBLM movement, Non Bankster Lives Matter, and hang these central bank degenerates.

reader2010's picture

George Carlin told us, "Forget the politicians. The politicians are put there to give you the idea you have freedom of choice. You don't. You have no choice. You have owners." Now you should've figured out who really own, control and rule not only the US but also the vassals of the US. 

hedgeless_horseman's picture

 

"...it has given the world a glimpse of not only how "helicopter money" will look, but also the market's enthusiastic response..."

 

What is a man to wear for this apocalypse?

http://www.zerohedge.com/news/2016-06-24/what-man-wear-apocalypse

Doom Porn Star's picture

That green jacket is so totally dope.  A cigarbox logo and sports franchise patch derivative masterpiece.

He prolly paid like he was buying a Bentley having that suit tailored, too...

IF you are really gonna fuck up big you might as well bling out for it.

 

...I actually really love all the stupid microphones all askew, taped to stands, sticking up and out at diferent heights; -pointing anywhere but at the speaker..

Here2Go's picture
Here2Go (not verified) Doom Porn Star Jul 11, 2016 1:07 PM

I think I see a few ads for Brawndo on there.

hedgeless_horseman's picture

 

We might want to panic.

Did you see the pic from Bernanke's speech in Japan?

yogibear's picture

Ben can't wait to wear his new threads!

Proudly impoverishing the little people to enrich the 1%.

Gaius Frakkin' Baltar's picture

Maybe they could use some of this to finally clean up Fukushima, but you know that ain't going to happen. They'll probably build 10 more reactors instead, because the war on deflation is more important than healthy grandchildren.

Madcow Kaczynski's picture

It looks like razor blades all over his jacket that's hella cokeballin!!

Overfed's picture

I never knew that FlavaFlav was president of Zimbabwe. Explains a lot.

Here2Go's picture
Here2Go (not verified) Overfed Jul 11, 2016 1:08 PM

It's what plants Flav!

RichardParker's picture

Hedge:

I don't suppose you happen to have a graph of The Zimbabwe Industrial Index priced in gold?

yogibear's picture

"What is a man to wear for this apocalypse?"

How fitting!

Ben Berananke can wear this jacket after he destroys the Yen and US dollar.

Herd Redirection Committee's picture

Ari Emanuel and Co. just bought UFC, from the Vegas mob, I mean Fertittas for (supposedly) $4 billion.

Where is all that money coming from?  Fresh off the printing press, you say? 

ACES FULL's picture

Vegas and Chicago have always been joined at the hip.

roadhazard's picture

Carlin never met Trump I guess.... heh

Joe Sichs Pach's picture

Great point.  

 

And who foots the bill for this travel?

wintermute's picture

"A Zero Coupon Perpetual JGB!"

Let's call it a "yen"

hedgeless_horseman's picture

 

Bingo.

And a rather large denomination yen.

Why so many zeros on the new yen?

Here2Go's picture

Speaking of zeroes

 

Zero's true legacy will be fulfilled when he joins Harriet Tubman on the newbuck.

CoonT's picture

"Fiscal and monetary stimulus brought our economy from the brink of destruction"  But, the cronyism, corruption and theft, that caused the decline in the first place, have yet to be addressed.

Dead Canary's picture

Good analysis as always MDB. God bless you.

jaxville's picture

  You hit the nail square on the head.  Credit based currency does not work.  It exists soley for those who enjoy power and wealth as a result. 

cheech_wizard's picture

You need to gold leaf some shit, broker a deal with some major art critic, say 50% of all profits, to tell the world your shitty art doesn't stink, but it's fucking "gold" as well...

Standard Disclaimer: A god damned twofer if you ask me.

Croesus's picture

@ Greenskeeper Carl: 

Yesterday, Cog Dis and I, engaged in a thoughtful discussion about "withdrawn consent". In that same train of thought, my advice is, grab all those chopper-bux you can, and use them to buy anything the Fed can't print. 

Starve the Beast! And when the Beast comes to collect his 'pound of flesh', give him a piece of lead to eat. 

NAV's picture

The banks are becoming mere edifices of worthless paper and digital dollars that soon won’t buy anything.   THe world is swimming in a sea of money that’s being transmuted back into worthless paper.

People killed themselves in the bankers’ 1930s depression when paper profits turned back into, well,  paper.

You are right: the law of scarcity and hyperinflation brought on by helicopter money will condemn the dollar to degradation. Perhaps that is what Bernanke was brought in to do, destroy the dollar to usher in the Fed/IMF SDR global currency to implement the bankers' plan for one-world governance.

The dissolution of Warburg’s Federal Reserve/IMF scam and its monetary system is long overdue.

EddieLomax's picture

But they said this would just be a one time event?

Seriously though, the naivety of this is breathtaking, the idea that they can print money "just this once" and get lots of stuff made/brought and it will not happen again taxes the belief of anyone.  

The problem with it that they do not understand is that someone has to lose, right now we have overproduction so each bout of inflation is being absorbed by production, but one day in the future we will have people with valuable stuff being asked to hand it over for a currency that depreciates ever faster.  Our best hope here is that Japan blows up first and shows us just how bad hyperinflation can be, otherwise quite a large chunk of the western world will descend into crazyness.

NAV's picture

 Not only are they printing with public announcements, but we all know they’re printing in secret for their friends, continuously. And it bears repeating constantly that Bernanke’s trip to Japan and the Fed’s efforts at ZIRP Forever are not intended to fix economies; they are intended to disenfranchise, de-sovereign and enslave the middle classes so that they can be silenced and used to make the globalists ever richer and more powerful. Case in point, the May 2016 annual inflation rate by ShadowStats is running  at 8.7%; the 30-year Treasury rate is 2.14%.

dmger14's picture

You got my approval with "lead to eat"

CuttingEdge's picture

I sense a scalping in the offing.

Perhaps a bit of Iron Maiden is appropriate for the situation:

https://www.youtube.com/watch?v=86URGgqONvA

HungryPorkChop's picture

Everyone this seems like the same game plan they used before.  Japan does QE for 6 months then when it starts to wind down the U.S. does QE for 6 months.  Then when it starts to wind down China does QE for 6 months then when it starts to wind down the Euro does QE for 6 months.  Then when it starts to wind down Australia, New Zealand, Canada and Mexico does QE for 6 months  Rinse and repeat..

At the same time keep gold and silver highly deluted with paper so they can be kept in check and constantly beat the livin' crap out of them with blind naked shorts. 

Anyway I'm sure its got a new twist but otherwise the game looks eerily familiar.

hedgeless_horseman's picture

 

Yep. I've been writing it here for years.

No more race to the bottom.

Synchronized diving is the new game now.

Yellen is in the warm up pool.

PT's picture

Warm Up pool?  Or Warm Pool?  Perhaps both.  Best to stay out of there.   ;)

Here2Go's picture
Here2Go (not verified) PT Jul 11, 2016 1:11 PM

Apparently Yellen took a piss because the water is starting to turn blue. At first I thought it was a bathing suit, but no human figure could possibly look like that.

mkkby's picture

Article is bullshit.  This is DEFINITELY NOT helli money.  It's just the same tired out QE + wasteful gov spending on infrastructure nobody wants or needs.

QE just sits on bank balance sheets and gets parked in stocks/bonds.  Gov spending creates phoney temporary jobs that disappear the moment that spending backs down.

You'd think Bernanke and friends would hav noticed this hasn't "fixed" japan for nearly 25 years.

BandGap's picture

Up arrow for you but.....it won't take years to get here. This is the template for rolling this out globally. Except in Russia and other smaller partsw of the world (economically).

Because black lives matter.

Here2Go's picture
Here2Go (not verified) BandGap Jul 11, 2016 1:24 PM

I had to interrupt my entire day today to emergency deliver a 10HP pump motor for Dindu Nuffin's public swimming pool in the arson section of BalMer, so Dindu & Trayvonn could stay cool.

 

So, I probably singlehandedly saved about 20 cops, another race riot, and another week of flags flying at half mast.

 

By the way, I can't really remember the last time I saw a flag that wasn't flying at half mast for something or another. I think it might have been the week that Scalia got killed, but my memory is foggy.

Dick Buttkiss's picture

The Internet as we know it is great for collaboration and communication, but is deeply flawed when it comes to commerce and privacy. The new blockchain technology facilitates peer-to-peer transactions without any intermediary such as a bank or governing body. Keeping the user’s information anonymous, the blockchain validates and keeps a permanent public record of all transactions.

That means that your personal information is private and secure, while all activity is transparent and incorruptible—reconciled by mass collaboration and stored in code on a digital ledger. With its advent, we will not need to trust each other in the traditional sense, because trust is built into the system itself.

http://blockchain-revolution.com

Haraklus's picture

The justifications they use tend to be awesome(ly bad) as well. Stuff like, "Oh, we don't want deflation like in the great depression!"

You mean the deflation caused by suddenly chopping the money supply in half via raising rates done by the Federal Reserve?

Jeffersonian Liberal's picture

Same mentality as liberal democrats in urban areas.

Everything falls to ruin under a liberal democrat.

The voters say, "Which other liberal democrat can we put in office to fix this?"

The elect a new liberal democrat.

Everything gets worse.

The voters say, "Which other liberal democrat can we put in office to fix this?"

Both problems are rooted in believing centralized power wants to fix problems (they don't, the existence of problems keeps them in power) or can fix problems (they can't, only the citizenry living and working and possessing the fruits of their labor freely can fix these problems).

NoDebt's picture

Condolances to Paul Krugman, but apparently the Vulcans had it right:  "Only Bernanke could go to Japan".

Buy everything, guys.  Buy EVERYTHING.

 

DownWithYogaPants's picture

That was not a clearly written article.