Monday, February 3, 2014

I believe the "IT" has begun

I haven't posted for a long time, but didn't really see the need to.  There probably aren't many left to read this.

I believe a cycle of events that will ultimately result in an implosion of both the emerging markets and specifically in the implosion of Japan and it's massive government debt is beginning.  In a way, what is about to occur in the world is a long time coming and is somewhat the fault of Japan.   They led the way early in how to avoid the pain of actually reducing governement costs and controlling debt and instead developed the equivalent of financial 3 card monty in order to allow the game to continue through the use of QE and other methods of tricking the market into believing that they were still a high quality borrrower. 

8 months ago I wrote a short essay, noting that Japan would lead the way and it would start with the Yen entering a deflationary period of strength.   I believe that is starting now.

I do not know how long it will last, but I suspect the Yen will continue gaining strength, even as the Japanese government will, I'm sure, initiate more shock and awe QE programs in attempts to reverse course.  I believe they will now fail, as I am now certain that they have lost all control and credability as a central bank.

This will cause massive damage to world markets as the Yen carry trade is unraveled. 

But the damage caused by the carry will just be an appetizer to the ultimate collapse of Japan and possibly even debt collapse in China.  Debt may also collapse many emerging markets that have followed the lead of Japan and the United States. 

I hope this crisis at least results in new thinking here in the United States relative to debt and central banking and that the likely destruction of Japan's economy somehow saves our future.