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Former Soros' Japan advisor Fujimaki takes center stage: “The volatility in the JGB market as well as the fact that there is large selling represent fear among investors,” Fujimaki said. “They are early signs of a larger selloff and we should continue to monitor the moves in the long-term bonds.” Fujimaki said he recently bought put options for Japanese government bonds of various maturities, without elaborating. He continues to hold real estate in Japan and options granting the right to sell the yen against the greenback expiring in less than five years. He also holds assets in U.S. dollars and currencies of other developed nations. "Japan’s finance is sinking into the ocean,” Fujimaki said. “There’s no escape from a market crash in the future when you have such enormous debt.”  “By expanding the monetary base to 270 trillion yen, the BOJ is making a huge bet which I think it will ultimately lose,” Fujimaki said in an interview in Tokyo on April 11. “Kuroda’s QE announcement is declaring double suicide with the government. The BOJ will have to share the country’s fate and default together. Shirakawa did more than enough and he had good reasons to not do any more,” said Fujimaki. “There will be tremendous side effects from monetary stimulus. QE doesn’t work and has no exit... Things may look rosy for now as stocks rise, but should we see hyper-inflation, JGBs will see a huge selloff, leading to a stock market crash,” said Fujimaki, adding that he sold “almost all” of his Japanese stock holdings some time ago.

The debate about the usefulness of sovereign credit default swaps (SCDS) intensified with the outbreak of sovereign debt stress in the euro area. SCDS can be used to protect investors against losses on sovereign debt arising from so-called credit events such as default or debt restructuring. With the growing influence of SCDS, questions arose about whether speculative use of SCDS contracts could be destabilizing - and this caused regulators to ban non-hedge-related protection buying. The prohibition is based on the view that, in extreme market conditions, such short selling could push sovereign bond prices into a downward spiral, which would lead to disorderly markets and systemic risks, and hence sharply raise the issuance costs of the underlying sovereigns. The IMF's empirical results do not support many of the negative perceptions about SCDS. In particular, spreads of both SCDS and sovereign bonds reflect economic fundamentals, and other relevant market factors, in a similar fashion. Relative to bond spreads, SCDS spreads tend to reveal new information more rapidly during periods of stress, admittedly with overshoots one way or the other. Given the current apparent 'stability' in many nations' bond market spreads, the chart below suggests an alternative way of judging what the credit market thinks - the volume of protection bid - and in this case some interesting names emerge.

The lesson from the events of 2007-2008 should have been clear: Boosting GDP with loose money can only lead to short term booms followed by severe busts. A policy of artificially cheapened credit cannot but cause mispricing of risk, misallocation of capital and a deeply dislocated financial infrastructure, all of which will ultimately conspire to bring the fake boom to a screeching halt. The ‘good times’ of the cheap money expansion, largely characterized by windfall profits for the financial industry and the faux prosperity of propped-up financial assets and real estate (largely to be enjoyed by the ‘1 percent’), necessarily end in an almighty hangover. The crisis that commenced in 2007 was therefore a massive opportunity: An opportunity to allow the market to liquidate the accumulated dislocations and to bring the economy back into balance. That opportunity was not taken and is now lost – maybe until the next crisis comes along, which won’t be long. It has become clear in recent years – and even more so in recent months and weeks – that we are moving with increasing speed in the opposite direction: ever more money, cheaper credit, and manipulated markets (there is one notable exception to which I come later). Policy makers have learned nothing. The same mistakes are being repeated and the consequences are going to make 2007/8 look like a picnic.

You can almost hear the snickering among European politicians.

It is the yen, not the dollar, that is the key currency in the foreign exchange market.  

As Cyprus has shown us, when push comes to shove, rule of law goes out the window. I fully expect that when things get really bad in the financial system the money grabs will come fast and furious. Foreign accounts, including possibly even Gold held aboard, will come under attack. Heck, the US got Switzerland to throw its 300-year-old banking secrecy out the window…

And you thought this would stay in Ireland and Cyprus right? Keep hope alive. RBS bailout per UK taxpayer = £1,414 or €1,654 or $2,177. but they didn't tell you everything, did they?

Remember when JPM's cuddly permabull Tom Lee called for a correction less than 2 months ago in a note titled "Stepping Aside Short-Term; Fade Strength and Look for Better Entry Point Around 1400-1450; Big Picture Constructive"? Apparently he did not take into account the $80 billion monthly hot money injection from the BOJ, which has made any fundamental analysis utterly irrelevant, and has completely destroyed any ability of the market to reflect reality or discount any other future other than that of hundreds of billions in new monthly liquidity injections. Which is why moments ago he "capitulated" on his correction call.

Mankind has faced a bewildering multitude of self-made catastrophes and self-made terrors over the past few millennium, most of which stem from a single solitary conflict between two opposing social qualities:  individualism vs. collectivism.  These two forces of organizational mechanics have gone through evolution after evolution over the years, and we believe the long battle is nearing an apex moment; a moment in which one ideology or the other will become dominant around the world for well beyond the foreseeable future. Collectivism as a philosophy is a perfect tool for oligarchy.  The men who dominate such systems rarely if ever actually believe in the tenets they espouse.  They sell the idea of single-minded society as a nurturing light that will create group supremacy, prosperity, and perfect safety.  But the truth is, they couldn’t care less about accomplishing any of these things for the masses. The most vital aspect of the collectivist process is convincing the public that the individual citizen is not sovereign, but is actually the property of the group.

"The crisis isn't over yet," warns Carmen Reinhart, "not in the US and not in Europe." Known for her deep understanding that 'it's never different this time', the Harvard economist drops the truth grenade a number of times in this excellent Der Spiegel interview. Sweeping away the sound and fury of a self-serving Federal Reserve or BoJ, she chides, "no central bank will admit it is keeping rates low to help governments out of their debt crises. But in fact they are bending over backwards to help governments to finance their deficits," and guess what, "this is nothing new in history." After World War II, all countries that had a big debt overhang relied on financial repression to avoid an explicit default. After the war, governments imposed interest rate ceilings for government bonds; but, nowadays, she explains, "monetary policy is doing the job. And with high unemployment and low inflation that doesn't even look suspicious. Only when inflation picks up, which is ultimately going to happen, will it become obvious that central banks have become subservient to governments." Nations "seldom just grow themselves out of debt," as so many believe is possible, "you need a combination of austerity, so that you don't add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation," with the consequence that people are going to lose their savings. Reinhart succinctly summarizes, "no doubt, our pensions are screwed."

Wondering which dominoes are next to fall in Europe? Here is a list based on a simple but powerful precept: follow the smart money. In this case, the smart money entered the at-risk banking sector of a particular nation to skim the fat premium offered by its higher interest rates--rates that reflected the higher risk. The smart money then exits the nations' banking sector before the inevitable solvency crisis triggers capital controls and depositor expropriations (the comically misleading "bail-in"). Why is any money left in at-risk periphery banks? "Things fail from the periphery to the core." With this in mind, we might arrange the dominoes in this order: Slovenia, Portugal, Malta, and then Spain.

In a day full of stunners, we next get news from Cyprus, where a few weeks after the start of the "investigation" into who pulled their cash out of the country's doomed banking system in advance of the confiscation news on March 16 (and where even the current president was implicated in transferring over €20 milion in family money to London) the parliamentary committee tasked with tracking down the leaks, has suspended its probe. As it turns out, it was "all the central bank's fault", which was charged with providing the data. The head of the Cypriot parliament's ethics committee, which was due to look into a list detailing transfers of more than 100,000 euros from the two major banks - Bank of Cyprus and Cyprus Popular Bank - said on Tuesday that the list fell short of what he had requested. "It was with great disappointment and anger that, when we opened the envelope, we realized it contained data for only 15 days even though we had asked for a year," lawmaker Demetris Syllouris told reporters. "This kind of behavior is unacceptable."

MERS: The Center of the Mortgage Scam

While the 2012 Deja-Vu chart analog continues to play out in far too similarly scary manner than many had believed possible, a glance at the catalysts over the two months that form the 'tops' should also send a shiver down the spine of the momentum believers. In 2012, the first dip was the Greek default and restructuring (a Europe-based crisis risk flare); that dip was bought (of course) as "the worst is behind us," only to see a miss in US non-farm payrolls confirm the "it's different this time," hopers were wrong once again. In 2013, the Italian election created a Europe crisis risk-flare, which was bought (of course) as "the ECB has our back", and then a month later, the non-farm payroll prints at a dismal level. For now, we remain hopefully bid on a sea of central bank liquidity (just as we were in 2012 thanks to ECB's LTROs) but what happens when 'markets' realize the hole is bigger than the central banks can fill?

Much has been said about "the Cyprus Template" (the so-called bail-in, where deposits are expropriated to recapitalize the insolvent banks), but virtually nothing has been written about the Real Cyprus Template. It appears the key preliminary step of the Real Cyprus Template is that money-center banks in Germany and other "core" Eurozone nations pull their money out of the soon-to-implode "periphery" nation's banks before the banking crisis is announced, "...this explains a lot about something that has always puzzled us: why the delay in resolving Cyprus after the Greek haircut?" We can now see there are two Cyprus Templates: 1. The public-relations/propaganda model; 2. The real one, that enables "core" eurozone banks to pull their deposits out of periphery banks before the deposit expropriation and capital controls kick in. Why are we not surprised the entire charade and expropriation is rigged to benefit the core banks?