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Saturday, November 01, 2014 2:14 AM

Chris Martenson and Mish Audio on Bank of Japan's Surprise Move on Friday

Every other Wednesday or so, Chris Martenson and I get together for a podcast. Sometimes one of us or the other is out of town, and sometimes Chris has other guest speakers.

Because of scheduling difficulties, Chris and I got together today instead of Wednesday. I asked Chris to make today's podcast generally available.

For our take of Friday's BoJ surprise move, please play the audio on Chris' Peak Prosperity site: Off the Cuff: Japanese Central Bank Throws Granny Under the Bus.

The audio is about 25 minutes long. The podcasts are not scripted. Chris and I just talk "off the cuff" on events of the day or the week.

Mike "Mish" Shedlock

Friday, October 31, 2014 3:30 PM

Could Non-Citizens Determine the Outcome of the Midterm Elections?

Here's the question of the day: Could Non-Citizens Determine the Outcome of the Midterm Elections?

Some elections, especially for Senate are so close, the unfortunate answer is "yes" as the following video insight from Insight from the Libre Institute explains.

Mike "Mish" Shedlock

12:38 PM

Nikkei Futures Up Limit, Yen Collapses, Dollar Up, Gold Down as BoJ Pledges "Unwavering Determination" to Get 2% Inflation

"Whatever it Takes" Japanese Style

It's a world truly gone mad.

In a surprise move today, the Bank of Japan announced further quantitative easing, dominated by long-term Japanese government bonds. The BoJ also announced it  and would triple annual purchases of exchange traded funds and property investment trusts.

BoJ governor Haruhiko Kuroda defied objections from four fellow board members, arguing that a tax-hit economy and a lower oil price have led to “a critical moment” in the country’s bid to escape from deflation.

The Financial Times quotes Kuroda as follows: The extra action “shows our unwavering determination to end deflation. There was a risk that despite having made steady progress, we could face a delay in eradicating the public’s deflation mindset. This is a pretty drastic step, so I think there will be a significant effect [on the economy].”

Stunning Market Reaction

  • Nikkei futures up lock limit (1160 points)
  • S&P 500 up 1.0% (new all-time high)
  • Yen plunges 2.5%
  • Dollar rises 0.9%
  • Gold sinks 2.75%
  • Oil down 1.1%

Nikkei Futures

S&P 500 Futures

Yen Futures

US Dollar Futures

Gold Futures

Oil Futures

One of my top two trade ideas worked today: Long the Nikkei hedged with a short-yen position. Gold certainly didn't. I still have faith central bank madness will eventually light a fire on my second key idea.

Buyer of Only Resort

Not only is Japan's population in decline, the remaining population is aging. Somehow, Japan believes its economy ought to grow anyway. In addition, Japan wants 2% inflation even though that is the last thing Japanese savers need.

Given that Japanese pension funds are now net sellers of Japanese government bonds, and given Japan's pledge to destroy the Yen to fight deflation, the buyer of only resort of Japan's government bonds is the Bank of Japan.

Currency Crisis Awaits

Japan's government debt is over 250% of GDP. Japan's debt is so high that an interest rate of somewhere between 2 and 3 percent will consume 100% of tax revenue.

Amusingly, the central bank wants 2% inflation and 0% bond rates. How's that going to work?

The answer is "It's not".

Today's message is clearly "get the hell out of the yen".

Somewhere down the line, a global currency crisis awaits. I am willing to hold gold indefinitely until that happens.

Mike "Mish" Shedlock

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