Saturday, August 5, 2017

Japan Wipes out Debt .. or does it?


Oh well.  The Japanese system has been essentially a closed system as has been that of China and yes the USA.  The difference there is the the USA has been able to make its currency the global settlement currency allowing a huge lift in demand from USA debt.  Yet that process allows the system to be closed.

All the rest are open to adjustment against the US dollar and that does affect policy.  Thus we have currency crisis as things spin out of control usually abetted by a corrupt elite who overwhelm confidence in their own currency.
Now Japan has woken up to the obvious that exchanging your debt with freshly printed cash at an orderly rate is NOT inflationary at all but actually necessary in order to slake demand for cash while bypassing those corrupt elites.  That is why the bank of Canada targets a two percent inflation rate to stay ahead of this demand..


This is an important article, and was shared by Ms. M.W.  At first glance, it seems to be good news, for the Bank of Japan is simply buying its own government's debt, effectively eliminating it.
...Or, at least, that's what we're being led to believe. Here's the article:
Now here's the part that concerns me:
Personal income taxes are at record highs, ringing in at $550 billion in the first four months of fiscal year 2017, or $1.6 trillion annually. But even at those high levels, handing over $830 billion to bondholders will wipe out over half the annual personal income tax take. Yet what is the alternative?

Japan seems to have found one. While the US government is busy driving up its “sovereign” debt and the interest owed on it, Japan has been canceling its debt at the rate of $720 billion (¥80tn) per year. How? By selling the debt to its own central bank, which returns the interest to the government. While most central banks have ended their quantitative easing programs and are planning to sell their federal securities, the Bank of Japan continues to aggressively buy its government’s debt. An interest-free debt owed to oneself that is rolled over from year to year is effectively void – a debt “jubilee.” As noted by fund manager Eric Lonergan in a February 2017 article...
Then comes a recommendation:
If the Federal Reserve followed the same policy and bought 40% of the US national debt, the Fed would be holding $8 trillion in federal securities, three times its current holdings from its quantitative easing programs.

Eight trillion dollars in money created on a computer screen! Monetarists would be aghast. Surely that would trigger runaway hyperinflation!

But if Japan’s experience is any indication, it wouldn’t. Japan has a record low inflation rate of .02 percent. That’s not 2 percent, the Fed’s target inflation rate, but 1/100th of 2 percent – almost zero. Japan also has an unemployment rate that is at a 22-year low of 2.8%, and the yen was up nearly 6% for the year against the dollar as of April 2017.

Selling the government’s debt to its own central bank has not succeeded in driving up Japanese prices, even though that was the BoJ’s expressed intent.
Now, all this sounds good on paper, and perhaps it would work. But there are two problems that I can see: (1) The Federal Reserve is a private corporation, and as such, selling debt to it effectively sells debt to its shareholders - and by the way, who are they? Might there be a conflict of interest here? Now, the last time I looked, when someone doesn't pay the bank, then the bank sends a gorilla to collect the collateral.

It's the collateral part here that's the problem, for the country is so badly mortgaged that the collateral might be anything, from the interstate system to the radar set at your local airport. I don't know about you, but I'd rather not see the likes of the Rockefailures and Rottenchilds turning the entire system into a toll system(which I suspect has been the game plan all along, incidentally. But that's the subject for another day).

What has occasioned all this? Well, that brings us to the second problem: (2) the complete departure of the federal government, and the congress, from constitutional provisions in the budgetary process, not to mention the issuance of money, to begin with. It's that constitutional money provision which is the foundation of all the rest, and it's perhaps that fact, that we are so far from the Constitution itself in the matter of federal finances, that is the reason two American states - Texas and Utah - have established state bullion depositories, and that other states have passed legislative resolutions concerning what constitutes legal tender.

In the meantime, the idea of a debt jubilee grows:
Rather than unwinding their securities purchases, the other central banks might do well to take a lesson from Japan and cancel their own governments’ debts. We have entered a new century and a new millennium. Ancient civilizations celebrated a changing of the guard with widespread debt cancellation. It is time for a twenty-first century jubilee from the crippling debts of governments, which could then work on generating some debt relief for their citizens.
But I would suggest that more than just a jubilee is needed. The central bank welfare-warfare model has been growing by leaps and bounds, not just with the Federal Reserve Act, but with the establishment of institutions like the World Bank, the International Monetary Fund, the Bank of International Settlements, and so on. A jubilee releasing debt still leaves the structure in place, and it's that structure that needs to be carefully examined, and audited.

See you on the flip side...

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