Hey all
Though I am no economist or claim to understand the nuances of high finance, I am quite fascinated with the concepts of sovereign vs private banks, creation of money, etc...
The whole argument that the Federal Reserve isn't federal, our own Bank of Canada (COMER) case currently underway, what Iceland recently did, and that whole line about the last countries in the world that didn't have central banks installed just happened to be the same countries that have been targeted and invaded over the past 16 years lol
Anyways, I have a friend who is a lot more learned than me about this stuff (I'm trying to set him up on robbstar's podcast)... and he recently got quite amped about this article about the BANK OF JAPAN..
Apparently, they are doing exactly that; monetizing its debt via their own sovereign bank
Here is what he wrote about it:
The more I absorb this article the more I realize the HUGE significance of Japan's move. EVERYONE on this page should read this article.
Kudos to Japan for shrugging off the neoliberal shackles of debt-based government financing and showing the world what true sovereign monetary policy looks like (although it is little better than quantitative easing). This is EXACTLY how Canada financed WWII and brought itself out of the Great Depression and into our golden years of funding infrastructure: by borrowing from the Bank of Canada. THIS is how sovereign governments should be funding themselves instead of borrowing from private sources at interest.
The pro-neoliberal bias of the FP is expected, but this article shills more so than many:
"The entire debtor/creditor relationship is rendered nonsensical." Yes, it was nonsensical to begin with, why should public expenditure rely on private money in a sovereign nation?
"Its ability to repay its debt, in turn, is derived from the consensus of markets that demand a higher rate of interest the closer a debtor gets to defaulting." Consensus of the markets meaning whatever ratings agencies manipulate it to be. Markets are manipulated at all levels, and ratings agencies can punish nations for taking monetary policy into their own hands. And just as with banks charging NSF fees to people with no money, ratings agencies charge more to nations having trouble paying, ensuring eventually they will have to privatize and sell off government assets and natural resources.
"This works well in a world ostensibly governed by free markets, and when the rules are universally applied." Works well for whom you neoliberal shill? Works well for multinational corporations and the wealthy, but the average person sees nothing but austerity, shrinking government, and higher taxes. And "free" markets are proven not to exist, get with the times.
Also, the author gets misleading, perhaps even outright lying, with this statement, "Does this mean that we could, theoretically, default on our debts and obligations in the expectation that they could be monetized by exchanging them for zero interest perpetual bonds, and ultimately “written off” as the BOJ is proposing?" That is not what is proposed at all, it's not "defaulting on the debt", it's the BoJ buying out that debt, BUYING IT OUT FROM PRIVATE INVESTORS, so there is no defaulting at all. It is more akin to quantitative easing.
The author intentionally misrepresented and demonized this whole issue.
Bank of Japan Sovereign Debt?
Here is the article:
http://business.financialpost.com/midas ... ed-emperor
Bank of Japan’s sovereign debt endgame is the naked emperor
Last week, Bloomberg reported in depth on Japan’s miraculous diminishing debt load. Turns out, despite a steady rise in government borrowing, the burden of repayment is diminished because the buyer of 90 per cent of that debt is the Bank of Japan.
This has serious implications for Canadian investors, yet the full significance has not yet been thoroughly unpacked by media. My bet is most analysts and economists are aghast at this admission by a G7 government that debt could just be summarily forgiven. It suggests the notion of liability in credit does not apply to government, or its associated (yet private, to varying degree) central banks.
But it’s really quite simple.
The single most important rule upon which our global debt-driven economic growth equation is dependent is that debt is repaid. If it isn’t, assets are confiscated. Just like if you don’t keep up with the mortgage payments on your house, you lose it. But what happens when the biggest creditor is also the debtor? The entire debtor/creditor relationship is rendered nonsensical.
The size of the debt any one nation can undertake is directly related to its ability to repay any proposed amount over time. Its ability to repay its debt, in turn, is derived from the consensus of markets that demand a higher rate of interest the closer a debtor gets to defaulting. The debt limit is reached when no one will lend, because even at the highest rate of interest, the chance of default is greater. Or when the debtor misses a payment.
This works well in a world ostensibly governed by free markets, and when the rules are universally applied.
The workability of the institution breaks down when a different set of rules are seen to apply to governments versus those that apply to everyone else.
The fact that Japan has essentially monetized most of its debt by taking it 90 per cent out of private hands, where it can be forgiven, as is now the expressed endgame coming from the BOJ, is exactly the scenario that any developed nation can confidently expect, thanks to this BOJ precedent.
Does this mean that we could, theoretically, default on our debts and obligations in the expectation that they could be monetized by exchanging them for zero interest perpetual bonds, and ultimately “written off” as the BOJ is proposing? Are we not — at least, aren’t the citizens of Japan — in a position to sue for constitutional harmony in the application of laws governing debt in society equally with government?
The obvious answer is “no,” but the only qualifier as to why that makes sense is that there are indeed different sets of rules for government versus private institutions. But hang on a sec… aren’t central banks private institutions? In the case of the BOJ, it is partially a public company — thus the trading symbol TYO:8301.
Imagine all central banks purchasing all the debt of the governments who have bestowed their respective monopolies on printing money? The emperor, indeed, is naked.
Might this explain how unsustainable debt loads as a portion of GDP in the developed world continue to be cast in the light of unconventional monetary policy as opposed to farce? Economists will dismiss this perspective as simplistic, but the math speaks for itself.
Japan risks, according to Bloomberg, causing borrowing costs to soar, credibility destruction for the BOJ, and currency purchasing power destruction.
But what is the significance for Canadian investors?
The Bank of Japan is the canary in the coal mine, in many respects, for the rest of the developed world’s economies. One might argue that its staggering debt-to-GDP ratio of 201+ per cent is only possible if Japan defaulted, a domino effect would likely catalyze a crisis of truly global proportions. The appearance of stability is more important than stability.
Last week, Bloomberg reported in depth on Japan’s miraculous diminishing debt load. Turns out, despite a steady rise in government borrowing, the burden of repayment is diminished because the buyer of 90 per cent of that debt is the Bank of Japan.
This has serious implications for Canadian investors, yet the full significance has not yet been thoroughly unpacked by media. My bet is most analysts and economists are aghast at this admission by a G7 government that debt could just be summarily forgiven. It suggests the notion of liability in credit does not apply to government, or its associated (yet private, to varying degree) central banks.
bloomberg
But it’s really quite simple.
The single most important rule upon which our global debt-driven economic growth equation is dependent is that debt is repaid. If it isn’t, assets are confiscated. Just like if you don’t keep up with the mortgage payments on your house, you lose it. But what happens when the biggest creditor is also the debtor? The entire debtor/creditor relationship is rendered nonsensical.
Related
Click here to get more Midas Letter content
Podcast: James Rickards, author of ‘The New Case for Gold’
Are central banks making direct investments to support markets?
The size of the debt any one nation can undertake is directly related to its ability to repay any proposed amount over time. Its ability to repay its debt, in turn, is derived from the consensus of markets that demand a higher rate of interest the closer a debtor gets to defaulting. The debt limit is reached when no one will lend, because even at the highest rate of interest, the chance of default is greater. Or when the debtor misses a payment.
This works well in a world ostensibly governed by free markets, and when the rules are universally applied.
The workability of the institution breaks down when a different set of rules are seen to apply to governments versus those that apply to everyone else.
The fact that Japan has essentially monetized most of its debt by taking it 90 per cent out of private hands, where it can be forgiven, as is now the expressed endgame coming from the BOJ, is exactly the scenario that any developed nation can confidently expect, thanks to this BOJ precedent.
Advertisement
Does this mean that we could, theoretically, default on our debts and obligations in the expectation that they could be monetized by exchanging them for zero interest perpetual bonds, and ultimately “written off” as the BOJ is proposing? Are we not — at least, aren’t the citizens of Japan — in a position to sue for constitutional harmony in the application of laws governing debt in society equally with government?
The obvious answer is “no,” but the only qualifier as to why that makes sense is that there are indeed different sets of rules for government versus private institutions. But hang on a sec… aren’t central banks private institutions? In the case of the BOJ, it is partially a public company — thus the trading symbol TYO:8301.
Imagine all central banks purchasing all the debt of the governments who have bestowed their respective monopolies on printing money? The emperor, indeed, is naked.
Might this explain how unsustainable debt loads as a portion of GDP in the developed world continue to be cast in the light of unconventional monetary policy as opposed to farce? Economists will dismiss this perspective as simplistic, but the math speaks for itself.
Japan risks, according to Bloomberg, causing borrowing costs to soar, credibility destruction for the BOJ, and currency purchasing power destruction.
But what is the significance for Canadian investors?
The Bank of Japan is the canary in the coal mine, in many respects, for the rest of the developed world’s economies. One might argue that its staggering debt-to-GDP ratio of 201+ per cent is only possible if Japan defaulted, a domino effect would likely catalyze a crisis of truly global proportions. The appearance of stability is more important than stability.
So Japan now overtly monetizing its debt through the BOJ is likely to signal that the limits of Keynesian economic stimulus have been reached, and a broad reset of the financial system globally may be nearing. That bodes well for commodity-based economies, as interest will flood into tangible assets away from sovereign debt derivatives and all the stocks that debt has subsidized for the last seven years.
On the downside, the economic turmoil that would likely accompany such a reset would also have tremendously negative connotations for Canadian manufacturers and exporters, as the Canadian dollar in this scenario would appreciate dramatically.
http://business.financialpost.com/midas ... ed-emperor
Bank of Japan’s sovereign debt endgame is the naked emperor
Last week, Bloomberg reported in depth on Japan’s miraculous diminishing debt load. Turns out, despite a steady rise in government borrowing, the burden of repayment is diminished because the buyer of 90 per cent of that debt is the Bank of Japan.
This has serious implications for Canadian investors, yet the full significance has not yet been thoroughly unpacked by media. My bet is most analysts and economists are aghast at this admission by a G7 government that debt could just be summarily forgiven. It suggests the notion of liability in credit does not apply to government, or its associated (yet private, to varying degree) central banks.
But it’s really quite simple.
The single most important rule upon which our global debt-driven economic growth equation is dependent is that debt is repaid. If it isn’t, assets are confiscated. Just like if you don’t keep up with the mortgage payments on your house, you lose it. But what happens when the biggest creditor is also the debtor? The entire debtor/creditor relationship is rendered nonsensical.
The size of the debt any one nation can undertake is directly related to its ability to repay any proposed amount over time. Its ability to repay its debt, in turn, is derived from the consensus of markets that demand a higher rate of interest the closer a debtor gets to defaulting. The debt limit is reached when no one will lend, because even at the highest rate of interest, the chance of default is greater. Or when the debtor misses a payment.
This works well in a world ostensibly governed by free markets, and when the rules are universally applied.
The workability of the institution breaks down when a different set of rules are seen to apply to governments versus those that apply to everyone else.
The fact that Japan has essentially monetized most of its debt by taking it 90 per cent out of private hands, where it can be forgiven, as is now the expressed endgame coming from the BOJ, is exactly the scenario that any developed nation can confidently expect, thanks to this BOJ precedent.
Does this mean that we could, theoretically, default on our debts and obligations in the expectation that they could be monetized by exchanging them for zero interest perpetual bonds, and ultimately “written off” as the BOJ is proposing? Are we not — at least, aren’t the citizens of Japan — in a position to sue for constitutional harmony in the application of laws governing debt in society equally with government?
The obvious answer is “no,” but the only qualifier as to why that makes sense is that there are indeed different sets of rules for government versus private institutions. But hang on a sec… aren’t central banks private institutions? In the case of the BOJ, it is partially a public company — thus the trading symbol TYO:8301.
Imagine all central banks purchasing all the debt of the governments who have bestowed their respective monopolies on printing money? The emperor, indeed, is naked.
Might this explain how unsustainable debt loads as a portion of GDP in the developed world continue to be cast in the light of unconventional monetary policy as opposed to farce? Economists will dismiss this perspective as simplistic, but the math speaks for itself.
Japan risks, according to Bloomberg, causing borrowing costs to soar, credibility destruction for the BOJ, and currency purchasing power destruction.
But what is the significance for Canadian investors?
The Bank of Japan is the canary in the coal mine, in many respects, for the rest of the developed world’s economies. One might argue that its staggering debt-to-GDP ratio of 201+ per cent is only possible if Japan defaulted, a domino effect would likely catalyze a crisis of truly global proportions. The appearance of stability is more important than stability.
Last week, Bloomberg reported in depth on Japan’s miraculous diminishing debt load. Turns out, despite a steady rise in government borrowing, the burden of repayment is diminished because the buyer of 90 per cent of that debt is the Bank of Japan.
This has serious implications for Canadian investors, yet the full significance has not yet been thoroughly unpacked by media. My bet is most analysts and economists are aghast at this admission by a G7 government that debt could just be summarily forgiven. It suggests the notion of liability in credit does not apply to government, or its associated (yet private, to varying degree) central banks.
bloomberg
But it’s really quite simple.
The single most important rule upon which our global debt-driven economic growth equation is dependent is that debt is repaid. If it isn’t, assets are confiscated. Just like if you don’t keep up with the mortgage payments on your house, you lose it. But what happens when the biggest creditor is also the debtor? The entire debtor/creditor relationship is rendered nonsensical.
Related
Click here to get more Midas Letter content
Podcast: James Rickards, author of ‘The New Case for Gold’
Are central banks making direct investments to support markets?
The size of the debt any one nation can undertake is directly related to its ability to repay any proposed amount over time. Its ability to repay its debt, in turn, is derived from the consensus of markets that demand a higher rate of interest the closer a debtor gets to defaulting. The debt limit is reached when no one will lend, because even at the highest rate of interest, the chance of default is greater. Or when the debtor misses a payment.
This works well in a world ostensibly governed by free markets, and when the rules are universally applied.
The workability of the institution breaks down when a different set of rules are seen to apply to governments versus those that apply to everyone else.
The fact that Japan has essentially monetized most of its debt by taking it 90 per cent out of private hands, where it can be forgiven, as is now the expressed endgame coming from the BOJ, is exactly the scenario that any developed nation can confidently expect, thanks to this BOJ precedent.
Advertisement
Does this mean that we could, theoretically, default on our debts and obligations in the expectation that they could be monetized by exchanging them for zero interest perpetual bonds, and ultimately “written off” as the BOJ is proposing? Are we not — at least, aren’t the citizens of Japan — in a position to sue for constitutional harmony in the application of laws governing debt in society equally with government?
The obvious answer is “no,” but the only qualifier as to why that makes sense is that there are indeed different sets of rules for government versus private institutions. But hang on a sec… aren’t central banks private institutions? In the case of the BOJ, it is partially a public company — thus the trading symbol TYO:8301.
Imagine all central banks purchasing all the debt of the governments who have bestowed their respective monopolies on printing money? The emperor, indeed, is naked.
Might this explain how unsustainable debt loads as a portion of GDP in the developed world continue to be cast in the light of unconventional monetary policy as opposed to farce? Economists will dismiss this perspective as simplistic, but the math speaks for itself.
Japan risks, according to Bloomberg, causing borrowing costs to soar, credibility destruction for the BOJ, and currency purchasing power destruction.
But what is the significance for Canadian investors?
The Bank of Japan is the canary in the coal mine, in many respects, for the rest of the developed world’s economies. One might argue that its staggering debt-to-GDP ratio of 201+ per cent is only possible if Japan defaulted, a domino effect would likely catalyze a crisis of truly global proportions. The appearance of stability is more important than stability.
So Japan now overtly monetizing its debt through the BOJ is likely to signal that the limits of Keynesian economic stimulus have been reached, and a broad reset of the financial system globally may be nearing. That bodes well for commodity-based economies, as interest will flood into tangible assets away from sovereign debt derivatives and all the stocks that debt has subsidized for the last seven years.
On the downside, the economic turmoil that would likely accompany such a reset would also have tremendously negative connotations for Canadian manufacturers and exporters, as the Canadian dollar in this scenario would appreciate dramatically.
I still don't understand it all, but am trying to follow.
This, combined with Brexit and other things, gives me a little hope that any such nefarious globalist agenda I may fear isn't quite ready to clamp down yet. Lots of nations starting to wake up and non-comply
I do believe a global society would be wonderful one day, but not by those who appear to be pushing for it in today's times...
If indeed that's what we are looking at
This, combined with Brexit and other things, gives me a little hope that any such nefarious globalist agenda I may fear isn't quite ready to clamp down yet. Lots of nations starting to wake up and non-comply
I do believe a global society would be wonderful one day, but not by those who appear to be pushing for it in today's times...
If indeed that's what we are looking at
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