• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

The Endgame For Japan’s Pyramid Scheme?

mbig

onomatopoeic
DP Veteran
Joined
May 14, 2009
Messages
10,350
Reaction score
4,989
Gender
Male
Political Leaning
Other
The giant Ponzi scheme (and economic 'Black Rodan') continues/builds.
This math disaster has been known for years, but Japan has not only Not imploded, the Yen has rallied this year.
Japan is an impossible debt/demographic situation, but somehow the world allows it/it's currency/bonds to be a world currency mainstay, even haven, like the dollar.
(slightly longer excerpt needed due to subscription/invisibility issue)


The Endgame For Japan's Pyramid Scheme? - Barron's
As the yen heads to 100 against the dollar, economists are fretting over Japan’s $10 trillion debt monster.
By William Pesek - April 13, 2016 - Barron's

Time to short the yen again? It’s tempting to wonder as none other than Mr. Yen, a.k.a. Eisuke Sakakibara, says the Japanese currency will strengthen to 100 by year-end.

A one-time Ministry of Finance big shot, Sakakibara has long been a walking, talking (too much, actually) contrarian indicator. One quick example: During a panel I moderated in May 2010, I asked Sakakibara if the Bank of Japan might raise interest rates within 5 years. He laughed out loud, flailed his arms in the air and dismissed the idea as “just stupid!” His conclusion: “Of course the BOJ will be raising rates by then! Everyone knows that!”

Not so much. Six years on, the BOJ is pushing rates further into Negative territory - and under great pressure to keep going. The yen Prime Minister Shinzo Abe has been working to devalue for more than three years is skyrocketing - up 10% so far this year. That spells doom not just for Toyota’s profit and the broader Nikkei, but Abenomics.

But what about Japan’s bond market? This, too, is an every-knows-that topic. Japan’s $10 trillion debt monster has long been the world’s most obvious, most Dangerous and least understood asset bubble. How can a rigid economy with a Shrinking population, negligible growth, miniscule immigration, flat wages, dismal productivity and waning competitiveness ever pay off its debt? It can’t without huge reforms, as everyone who’s ever studied economics knows.
[......]
Japan Inc. defied the laws of financial gravity by creating a Pyramid scheme. In the decades following World War II, it became customary to pile savings into JGBs.
[......]
The question is whether that sense of loyalty is breaking down, particularly with the BOJ pushing rates negative. Japan, for example, is experiencing a bull market in demand for 10,000 yen bills and household safes as consumers wonder about bank solvency, as they did back in Sakakibara’s MOF days. The BOJ is printing an extra 180 million of highest-denomination bills this fiscal year, a sign that negative rates are backfiring spectacularly.

This loyalty question worries Blanchard, too. That might force Japan to tap foreign investors to pick up the slack as domestic ones age or lose trust in the BOJ. “To our surprise, Japanese retirees have been willing to hold government debt at zero rates, but the marginal investor will soon not be a Japanese retiree...
[......]
Japan would do all it can to avoid that scenario. Tokyo holds two trump cards that peers lack. One, roughly 90% of JGBs are in domestic hands, reducing capital-flight risks. Two, an Armageddon put option: domestic debt forgiveness on a massive scale.
[......]
It makes you wonder how the BOJ could ever taper, like the Federal Reserve, never mind find an exit strategy. Nothing is more important to Tokyo in the long run than preserving calm in the world’s frothiest bond market. As such, Kuroda is just as stuck in Tokyo’s pyramid scheme as anyone.
[......]
 
Last edited:
More central banks are going to do this - which is why they are also pushing to stop halt and reduce the issuance of physical currency.
 
More central banks are going to do this - which is why they are also pushing to stop halt and reduce the issuance of physical currency.

I don't worry about Japan or China despite the massive govt involvement in their economies. Monetary policy is now good enough to prevent a financial crisis from spreading throughout the entire economy.
 
I don't worry about Japan or China despite the massive govt involvement in their economies. Monetary policy is now good enough to prevent a financial crisis from spreading throughout the entire economy.

Ah yes. That's why we avoided such back in 2007-2008.
 
Ah yes. That's why we avoided such back in 2007-2008.

that was a bubble the likes of which we had not seen since the Fed and Friedman's discoveries. Now we are fully prepared going forward as Japan China and Europe have been demonstrating for decades.
 
I don't worry about Japan or China despite the massive govt involvement in their economies. Monetary policy is now good enough to prevent a financial crisis from spreading throughout the entire economy.
You might want to worry.
This is the world's third biggest economy, Not Greece... and they are Bust.
Should (when) Japan Implodes, all hell will break loose in the markets.
Black Swan events are unforeseen, but only the timing on this might be a surprise.
Another similar take.

Olivier Blanchard eyes ugly 'end game' for Japan on debt spiral
Ambrose Evans-Pritchard, Lake Como, italy
11 April 2016 - Telegraph.co.uk

Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately
be forced to inflate away its debt in a desperate end-game
, one of the world’s most influential economists has warned.

Olivier Blanchard, former chief economist at the International Monetary Fund,
said zero interest rates have disguised the underlying danger posed by Japan’s public debt,
likely to reach 250% of GDP this year and spiralling upwards on an unsustainable trajectory.
“To our surprise, Japanese retirees have been willing to hold government debt at zero rates,
but the marginal investor will soon not be a Japanese retiree,” he said.

Prof Blanchard said the Japanese treasury will have to tap foreign funds to plug the gap and this will prove far more costly,
threatening to bring the long-feared funding crisis to a head.

“If and when US hedge funds become the marginal Japanese debt, they are going to ask for a substantial spread,”
he told the Telegraph, speaking at the Ambrosetti forum of world policy-makers on Lake Como.

Analysts say this would transform the country’s debt dynamics and kill the illusion of solvency,
possibly in a Sudden, non-linear fashion. Prof Blanchard, now at the Peterson Institute in Washington,
said the Bank of Japan will come under mounting political pressure to fund the budget directly,
at which point the country risks lurching from deflation to an inflationary denouement.
[.......]

japan_debts_comp-large_trans++hjFNQQUQfQZ_ACEQcfc7XthWOGjtMJWNE5kbE-GP774.PNG
[/img
 
Last edited:
Another similar take.
Should (when) Japan Implodes, all hell will break loose in the markets.

what could possibly cause that and why couldn't the central bank and central govt easily handle it???
 
what could possibly cause that and why couldn't the central bank and central govt easily handle it???
They only 'handle' it now by printing more money and buying their own debt. They spent almost twice what they take in revenues for the last 7 years.
The Circle J Ranch.
I suppose eventually, the Japanese govt could own all their own bonds.. financed by printing Yen.
But at that point, no one else will want the Yen, and it will inflate to a fraction of its current exchange rated (as it already should).
Wheelbarrow money.
 
They only 'handle' it now by printing more money and buying their own debt. They spent almost twice what they take in revenues for the last 7 years.
The Circle J Ranch.
I suppose eventually, the Japanese govt could own all their own bonds.. financed by printing Yen.
But at that point, no one else will want the Yen, and it will inflate to a fraction of its current exchange rated (as it already should).
Wheelbarrow money.

how goofy and absurd to be worrying about inflation when deflation has been more the worry for 20 years!
 
how goofy and absurd to be worrying about inflation when deflation has been more the worry for 20 years!

Minor, short term deflation is the most idiotic thing to worry about. This is just some nonsense that the media/government created to get Americans to allow central banks to do whatever they wish and allow governments to run huge deficits...all to 'fight off deflation'.

Who in their right mind is worried about their rent going down a bit? Or their food getting slightly less expensive? Or their gas costing a little less?

'What's wrong Dale?'
'Oh Terry, I am terrified that my food bill might go down by $3 this month'


:roll:


Oh, and that ridiculous argument that deflationists trundle out of 'people will stop buying goods if they think they will drop in price later'.

Yeah, if it drops by 10-20%, maybe.

But 1 or 2%...no chance.

Are you/they seriously suggesting that some guy is not going to buy an iPad for his child because deflation is running at 1% and that means his $1000 iPad will cost (if the deflation rate stays as is) only $990 in a year? Like he is going to wait an entire year just to save $10 off of his $1,000 iPad?
Or people are going to not fill up with gasoline because it might go down a penny a gallon next month?
Don't be absurd. He will buy the bloody iPad now after filling up his gas tank and be glad he saved a few cents.


Minor deflation as a major worry is a joke.

Think people before you give into government propaganda.
 
Last edited:
Silly article.
The author doesn't even seem to understand what a pyramid scheme actually is.
The people who holds JGBS don't seem to be worried. Oh, right, Japan is the sole issuer of the Yen.
And hell, people are actually willing to pay the japanese government to acquire the JGBS!
 
.
Should (when) Japan Implodes,
for 10th time:
why would Japan implode if they use preventative monetary policy?????
 
for 10th time:
why would Japan implode if they use preventative monetary policy?????
WTF does that mean?
You mean any country, in any Fiscal or demographic bind, can Print their way out?
ie, a country with NO/Not enough GDP, and shrinking workforce/population, can just keep issuing debt to pay for anything it wants, and buying that/it's own debt with newly printed money without consequence, just because they use 'preventive monetary policy'?
WTF is that?
(End gaming: What happens when there are 20 Japanese left who owe 20 quadrillion yen and all 20 just print money? Will people take their [worthless] currency for Oil, Timber, wheat etc?)

imagep, who gave you a like for that inanity (like all your posts in this string), is welcome to try this one out as well.

Silly article.
The author doesn't even seem to understand what a pyramid scheme actually is.
The people who holds JGBS don't seem to be worried. Oh, right, Japan is the sole issuer of the Yen.
And hell, people are actually willing to pay the japanese government to acquire the JGBS!
A pyramid scheme takes in money it can't pay back.
The Japanese govt Issues debt it cannot pay back, EXCEPT by issuing/printing Yen in dizzying amounts that will devalue it dramatically.
The govt has spent app Twice what they take in for 7 years and has a much higher Debt ratio than Greece ever had.
That IS a pyramid scheme and the victims will be those holding Yen or Yen denominated JGBs, because they will have to inflate/ARE trying to inflate/devalue their way out.
It called Abenomics, a variant of the Ponzi/pyramid scheme in which the Perp can print new, but increasingly worthless money to pay back the victims, instead of not paying back the victims.
 
Last edited:
WTF does that mean?
You mean any country, in any Fiscal or demographic bind, can Print their way out?
.

a central govt can do a huge variety of things like our Fed did to masterfully prevent a depression after the housing crash!! Now do you understand?
 
a central govt can do a huge variety of things like our Fed did to masterfully prevent a depression after the housing crash!! Now do you understand?
One of us understands, and has a 35 year Wall Street/economic career.
As do the TWO Article writers I cited in this string, while you continue to wave the EMPTY magic wand of 'preventive action'.

AGAIN: try and answer this time:
mbig said:
WTF does that mean?
You mean any country, in Any Fiscal or demographic bind, can Print their way out?
ie, a country with NO/Not enough GDP, and shrinking workforce/population, can just keep issuing debt to pay for anything it wants, and buying that/it's own debt with newly printed money without consequence, just because they use 'preventive monetary policy'?
WTF is that?
(End gaming: What happens when there are 20 Japanese left who owe 20 quadrillion yen and all 20 just print money? Will people take their [worthless] currency for Oil, Timber, wheat etc?)[/b]
Your reply is again nonresponsive and cites NO specific economic remedy for the Basic math involved.
I already ignored one of your breathtakingly goofy posts on the last page.
I think that is going to have to become permanent. Your replies are so novice/empty.


EDIT:
Note Below, at least strike 3, if not strike 5, for the incredibly Obtuse posts of James972.
Unable to answer me, nor give any specific action...
Just "read Bernankes book."
Yup, "read that book" is always a great mb reply!
 
Last edited:
Your reply is again nonresponsive .

of course thats BS. Why not read Bernanke's book to learn about the huge variety of actions a modern central bank can take to prevent a huge crisis like the recent housing crisis from turning into a depression!!
 
of course thats BS. Why not read Bernanke's book to learn about the huge variety of actions a modern central bank can take to prevent a huge crisis like the recent housing crisis from turning into a depression!!

How do you not know that what Bernanke did didn't worsen the problem and or created a new problem that's going to be more severe than what would have happened in 2008 if he did nothing?
 
How do you not know that what Bernanke did didn't worsen the problem
that's totally 100% insane of course . Read the book!!! There was a complete credit freeze developing in the wake of the housing collapse that would have resulted in an instant world wide depression without the heroic Fed actions. Bernanke pulled us pack from the brink.
 
that's totally 100% insane of course . Read the book!!! There was a complete credit freeze developing in the wake of the housing collapse that would have resulted in an instant world wide depression without the heroic Fed actions. Bernanke pulled us pack from the brink.

So I should read a book about the actions of the guy who wrote the book...:roll: Gee I bet that's not going to be unbiased and only look at issues from one side at all:roll:
 
So I should read a book about the actions of the guy who wrote the book...:roll: Gee I bet that's not going to be unbiased and only look at issues from one side at all:roll:

actually there is only one side. We were headed directly and quickly into a world wide depression and the only possible way to stop it was was the Fed.
 
actually there is only one side. We were headed directly and quickly into a world wide depression and the only possible way to stop it was was the Fed.

So you actually think there's only one way to deal with recessions? :roll:

And by world wide depression you do mean just USA+Europe right? And how have we not had a worldwide depression? Europe is still below it's 2007/8 GDP high (whilst also having an increase in population), and only Germany and the UK have managed to get above the 07/8 high out of the bid economies of the continent. France, Italy and Spain all have unemployment rates above 10%, as does the entire continent. We're 8 years on, how is that not a serious depression? So how exactly did the FED stop a 'world wide' depression?
 
So you actually think there's only one way to deal with recessions? :roll:

?

I said there was only one way to stop the impending world wide depression that was rapidly forming in the wake of the housing crisis. Why not reread for comprehension?
 
So you actually think there's only one way to deal with recessions? :roll:

And by world wide depression you do mean just USA+Europe right? And how have we not had a worldwide depression? Europe is still below it's 2007/8 GDP high (whilst also having an increase in population), and only Germany and the UK have managed to get above the 07/8 high out of the bid economies of the continent. France, Italy and Spain all have unemployment rates above 10%, as does the entire continent. We're 8 years on, how is that not a serious depression? So how exactly did the FED stop a 'world wide' depression?

1) a recession is 3 quarters of GDP decline. Even France has not had a recession since crisis ended let alone a depression. You should get your definitions straight.

2) central bank policy can prevent a depression but the further the economy veers aways from capitalism the lower its economic growth will be.
 
I said there was only one way to stop the impending world wide depression that was rapidly forming in the wake of the housing crisis. Why not reread for comprehension?

Ok so you do think that there is only one way to solve recessions, great thanks for that :) Has it ever occurred to you that maybe, just maybe, government intervention just worsens the problem both short and long term, also please remember it was the government intervention that helped fuel the 01 stock bubble and 08 housing crises. If the government was so competent why did it cause problems in the first place?

1) a recession is 3 quarters of GDP decline. Even France has not had a recession since crisis ended let alone a depression. You should get your definitions straight.

2) central bank policy can prevent a depression but the further the economy veers aways from capitalism the lower its economic growth will be.

No a recession is 2 quarters, you should get your definitions straight. France has experienced negative growth 10 times out of the last 31 quarters, with a further 3 quarters with 0% growth, and only 1 quarter above 1% growth, all while having unemployment at 9% from the start of the depression, rising to 10% throughout 2012, and it still being at 10%. How is that not a depressed economy?

Central banks can't stop recessions or depressions and it's foolish to think otherwise. And you just endorsing less government and more capitalism there admitting that faster growth occurs with MORE capitalism ;)
 
Ok so you do think that there is only one way to solve recessions,

I said, "prevent world wide depression", not solve recessions. Do you understand????????
 
Back
Top Bottom