Japan’s Nikkei 225 was down 110 points yesterday. It declined .85 percent to close under 13,000 at 12,904. This is a two month low and is several thousand points below what it was one week ago.
Further, the Yen collapse is also speeding up. The Bank of Japan policy to destroy the Yen is bearing fruit. 24 hours ago the Yen was at 99. Today it is at 96. 5. This is a 2.71 drop in less than 24 hours. It goes without saying that a two percent swing in your currency in one trading session is not a good sign.
Japan has created what is called the Yen carry trade. Japan’s interest rates are so obscenely low it creates a funnel. Foreigners have made fortunes by profiting from the difference in interest rates between Japan and everybody else. For instance, if you borrow at zero and then invest in Italy there is a 4 percent profit right there. At least until Italy’s bond market collapsed.
What has been called “Abegeddeon” means that as Japan’s interest rates increase the carry trade collapses. Doomer Doug has read somewhere that if Japan’s interest rate rises to 2.8 percent it is all over. The ratio will increase from 200 percent to 300 percent in terms of debt service.
It has always been about debt service to maintain the fiction the global debt can be paid off. Doomer Doug will say it yet again. THE GLOBAL DEBT IS UNPAYABLE. The whole point of TARP, the Federal Reserve, and the Bank of Japan pouring money in is to maintain the fiction the debt is payable. Once it becomes clear it is not, or more accurately people finally admit it is not, the entire rigged and corrupt global economic system crashes and burns.
We came close in 1998 with the Long Term Capital Management collapse due to the Russian bond default.
This is what we are facing now in my opinion. Japan’s six month old policy of destroying the Yen will mean higher interest rates in Japan. And that increase will shake both Japan and the global economic system to its rotten core.
Japan’s Nikkei is closing in on a 20 percent “correction.” We are told it is now a bear market. It is not a bear market. We are dealing with the early phases of a global economic collapse. The only thing that has kept the system up is the stock market values. And the only reason they have stayed up is the massive effort of the US Federal Reserve, and now the Bank of Japan buying up stocks and bonds to maintain forward momentum.
We have one more trading session in Japan on Friday. The 14,000 firewall was breached with ease. The 13,000 level was breached with ease. There is nothing other than a long fall at this point. There is NO technical reason the Nikkei 225 can’t fall several thousand more points. There is no reason it can’t do that in 300 to 500 point chunks over a several day period.