Alright context…. Japan’s central bank (BoJ) has been the most classic Keynesian clown show of all the central bank clown shows for nearing a decade now. Coming out of the great financial crisis, most of the developed economies were struggling with slow economic growth – which the central bankers all attributed to low inflation. In all their wisdom, the developed central banks all went down the path of reckless monetary policies that you are all familiar with, except where the others, like the Federal Reserve, The Bank of England, or the European Central Bank only went half retard with QE, the BoJ went FULL retard with QE, literally buying the stock market, implicit currency devaluation and most recently Yield Curve Control on their government debt.
The reasons they gave for the policy was that the Japanese inflation was too low, which was suppressing economic investments and growth, and that they wanted to weaken the Yen because it would make the Japanese exports cheaper and more attractive to foreign buyers who would in turn buy more Japanese products and lift growth… the reality is that the Japanese were suffering from low economic growth because their youth decided they rather play Pokémon than find company in the other sex, so the Japanese birth rate has fallen off a precipice to be one of the lowest birth rates of all developed economies – an aging demographic can’t produce economic growth. Adding to the demographic issue is Japans vast government debt (twice that of what the US debt is per gdp), the bad debt is a parasite to growth as it crowds out other investment that would be allocated more efficiently.
So around 2012, the BoJ embarked down the path of monetary policy Kamikaze status. The USD to Yen rate was around 80…. A few years of money printer go Brrrr passes and the BoJ starts seeing success and by the summer of 2016, the USD to Yen rate was around 100 for about a 30% increase over FOUR years. The BoJ was pleased as the move was accomplishing their stated desires, the ten was weakening at an acceptable pace, trade exports were growing and inflation wasn’t zero, it’s all good!
Fast forward four more years to December 2020…. Miraculously, even for four years of BoJ aggressively buying the stock market, printing money to buy their debt, and generally throwing yen around like is was meaningless, the USD to Yen rate was essentially the same as it was in the summer of 2016, just slight above 100.
Than comes along January 2021. Something breaks. There isn’t exactly one thing that can be easily identified as the exact cause, but the likely largest contributing factor was the supply chain issues caused by the worlds insane response to covid, and the impacts to trade that the big Japanese exporting companies began seeing down the pipeline.
3 months into 2021 and the USD to Yen rate breaks 108….. By October ‘21 and it’s above 114…… that’s a significant move for a G7 currency but it’s not CRAZY.
Than we get to march of this year. The Soviets rev up their diesel T-72’s from the 70s and decide that they want to get frisky with NATO – and Biden, forgetting that he just axed the US oil production 6 months ago, decides the US and it’s “allies” don’t need oil anymore and sanctions Russia and Russian oil and natural gas.
Welcome to hell Japan. The Japanese have essentially no domestic oil or gas production. They also have no nuclear energy anymore after taking all nuclear power plants offline after Fukushima. So whatever energy they need, they must import…. Whatever they import they must buy…. Whatever they buy they have to pay for in currency that they are importing from…. This has a nasty effect of destroying currencies.
Now fast forward to today. The current USD to Yen rate is 132….. remember it took for year for the yen to depreciate 30% back in 2012. The yen has depreciated 22% over the last SIX MONTHS ALONE. For a G7 currency, this is CRAZY.
So you are probably wondering why you’ve read this far and what it has to do with silver… here’s where it gets interesting. The BoJ, making our clowns at the fed seem almost sane, have decided to commit to capping the yield of their government 10 year bond to 0.25%. That means the BoJ has stated that they will print an unlimited amount of yen, in order to buy the government bonds to keep interest rates below the target. This sent everyone and their mother in Japan scrambling to ditch the yen…. “They bought silver right???” Nope. The Japanese are in love with US treasuries.
The Japanese are the second largest holder of US treasuries and have managed to accumulate $1.3 trillion of US debt, a position which has earned Japan a tidy profit over the years. So what does BoJ do about the Yens fall turning into a catastrophic risk? They only have two choices – one is they abandon their yield curve control. They can’t do this because the Japanese government debt to GDP is 266%, if interest rates rise, the Japanese economy will go into a depression deeper than anything a developed country has seen as their debt deleverages and the Yen would rebound to sharply, killing their economic drivers of export industries. Japans economy would cease to exist for all practical purposes.
What’s their other option…? The BoJ will have to intervene to directly strengthen the Yen. They will do this buy going into the open market and buying Yen. With what money? They will tap into the $1.3 trillion of US treasuries reserves and sell the US bonds to buy Yen. This will cause a sudden appreciation of the yen, you will probably see this occurring this week or next, and they will likely try to drop the USD to Yen rate to 125. The intervention will be an ongoing battle, and the Japanese will have to expend most of their US treasuries….
What does this have to do with silver???? Hang in there. As the the BoJ dumps their US bonds, this will sky rocket the US rates on our ten year bond. This will be occurring AT THE SAME TIME as the worlds largest holder of US treasuries (remember Japan is number two), is attempting to sell its bonds as it ends its own QE program. US interest rates are going to EXPLODE. We are talking about US ten year interest rates doubling over summer.
This will be catastrophic.
It will cause a stock market crash (30% or more) and gold and silver will also likely see a rapid and strong plummet. Silver stackers here will be losing their shit. News of lay offs will be coming hard and fast and everyone who isn’t comfortably wealthy will be looking at every means possible to stay solvent as they are hit from rapid inflation of food and gas and housing on one side, and the specter of losing their job on the other. That $10k in silver you have has just lost 30% of its value and you begin panicking realizing that need that $7k remaining to keep a roof over your kids heads if you lose your job…. You begin looking up Coin dealers in your area to sell your stack.
Folks…. It’s going to get BAD. The night WILL be darkest before the dawn if you have silver or gold. This is the end game. The feds will be forced ONE LAST TIME to re-enter the market. They will buy everything and anything. They cannot let the 10 year interest rate break 5%, as that would make 33% of the entire government budget go towards interest payments alone. The feds will drop the facade of being independent and of not monetizing debt – they will be forced to explicitly state that they are monetizing debt. This is how the USD collapses.
Only AFTER the BoJ begins cashing in their ten year bonds over the next two to three months…. Only after the US ten year rate breaks 5%…. Only after the talking heads on CNN and CNBC are talking about massive layoffs day after day and only after the fed turns course will the COMEX break.
The scary thing is, it’s happening. Watch the USDJPY yen rate over the next week or two. When you see a sharp and sudden drop that takes it down to 127ish in a single trading session, that’s BoJ intervening to strengthen their currency and that’s the cue that we have 3 months before SHTF and 6 to 8 months before COMEX breaks.
Kuroda is bringing Japan 🇯🇵 to the ruin, and fast. pic.twitter.com/odcGdeLgni
— The Market Dog (@TheMarketDog) June 7, 2022