Study Guide: Japan, meltdowns, and the debt

Glenn spent the first fifteen minutes talking about the way the nuclear reactor works in Japan. Want to read more (and possibly get a better understanding than Glenn's M&M demonstration)? Read this form Business Insider

And here's some information on Pimco dumping US Debt:

Charles Payne, Fox Business Network

  • A lot of people have voiced concern about bonds even before PIMCO so others will follow
  • The BOJ is pumping $180 billion into Japanese economy that will keep Yen under pressure by the same token serious demand for funds to rebuild are going to pressure the Yen higher but probably means Japan will be loath to sell US Treasuries because it doesn’t want the dollar to weaken
  • Don’t think there will be an impact beyond Japan with respect to the Yen but I’m watching food commodities. Japan is a major importer of corn (#1) and other food commodities like wheat and there will be so damage to their ability to farm these items...other than that our imports from Japan peaked in 2006 and our exports have been flat…yes, they are still in the $60.0 billion neighborhood but in critical areas that are unlikely to change significantly and not long term
  • Japan has the most debt in the world…no natural resources and has flooded its economy with money so it would be the most vulnerable to hyperinflation of any country on the planet. Just not sure how long it would take…not completely sure on how it impacts US but could force Japan to sell treasuries and that might force the Fed to go with QE3 and continue to lower the dollar and swell it is balance sheet

Steve Moore, Wall Street Journal

  • Pimco is dumping US bonds because the interest rates are way too low given the high rates of potential inflation and higher interest rates to come.
  • No one should buy treasuries now at these low interest rates. The big bubble is in the bond market
  • The Yen is falling as the Japan economy gets creamed by the earthquake.  The dollar will strengthen in short term but stocks will fall.
  • Impact of the earthquake is negative as Japan rebuilds and trade with Japan is curtailed.
  • I don’t see hyper inflation in Japan – we are get greater risk of that than they are – though they have a large debt too.

(Bloomberg, March 9, 2011) Pimco’s Gross Eliminates Government Debt From Total Return Fund

  • Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., eliminated government-related debt from his flagship fund last month as the U.S. projected record budget deficits.
  • Pimco’s $237 billion Total Return Fund last held zero government-related debt in January 2009. Gross had cut the holdings to 12 percent of assets in January, according to the Newport Beach, California-based company’s website. The fund’s net cash-and-equivalent position surged from 5 percent to 23 percent in February, the highest since May 2008.
  • Yields on Treasuries may be too low to sustain demand for U.S. government debt as the Federal Reserve approaches the end of its second round of quantitative easing, Gross wrote in a monthly investment outlook posted on Pimco’s website on March 2. Gross mentioned that Pimco may be a buyer of Treasuries if yields rise to attractive levels.

(Marketwatch, March 14, 2011) Yen retreats as Bank of Japan adds stimulus

http://www.marketwatch.com/story/japan-yen-falls-back-as-stocks-slump-after-quake-2011-03-13

  • LONDON (MarketWatch) — The yen retreated versus major rivals in choppy trade on Monday, as the Bank of Japan provided a massive dose of liquidity and voted to further loosen its monetary policy in the wake of last week’s devastating earthquake and tsunami.
  • The central bank injected a total of 15 trillion yen ($183 billion) into the markets Monday in a bid to bolster financial stability
  • The U.S. dollar rebounded sharply to ¥82.03 on Monday, after tumbling to a 2011 low of ¥80.60 earlier in the day, from ¥81.88 in New York late Friday.
  • The path for the yen remains uncertain as traders weigh the implications of the disaster, with some strategists looking for the currency to appreciate as insurance firms and others repatriate funds.
  • The yen rallied by around 20% in the wake of the January 1995 Kobe earthquake, eventually hitting an all-time high versus the U.S. dollar at ¥79.75.

And Here Comes Inflation….

(Business Insider, by John Maudlin, March 12, 2011)

http://www.businessinsider.com/and-here-comes-inflation-2011-3#ixzz1GaB9KRYL

  • Bernholz examined 12 of the 29 hyperinflationary episodes where significant data exist. Every hyperinflation looked the same. “Hyperinflations are always caused by public budget deficits which are largely financed by money creation.” But even more interestingly, Bernholz identified the level at which hyperinflations can start. He concluded that “the figures demonstrate clearly that deficits amounting to 40 percent or more of expenditures cannot be maintained. They lead to high inflation and hyperinflations. . . .” Interestingly, even lower levels of government deficits can cause inflation. For example, 20 percent deficits were behind all but four cases of hyperinflation.
  • Stay with us here, because this is an important point. Most analysts quote government deficits as a percentage of GDP. They’ll say, “The United States has a government deficit of 10 percent of GDP.” While this measure makes some sense, it doesn’t tell you how big the deficit is relative to expenditures. The deficit may be 10 percent of the size of the U.S. economy; currently the U.S. deficit is over 30 percent of all government spending. That is a big difference.
  • Interestingly, currently Japan and the United States are not far from levels that have preceded hyperinflations. The big difference between Japan or the United States and countries that have experienced hyperinflations is that the central banks are not monetizing most of the deficit. If they were to do that, then we would be one step away from paying quadrillions of dollars for a stamp or a sandwich (see Figure 8.6). It is extremely important to note Bernholz’s conclusion. Hyperinflations are not caused by aggressive central banks. They are caused by irresponsible and profligate legislatures that spend far beyond their means and by accommodative central banks that lend a helping hand to governments.
  • What are the implications for the present day? Fiscal liabilities are the real threat that will lead to higher inflation, if central banks continue to monetize government liabilities. In the case of a monetization, governments with independently authorized central banks disavow the overly convenient slippery slope option of paying their bills by printing new currency. A government must pay down its liabilities with currency already in circulation or else finance deficits by issuing new bonds and selling them to the public or to their central bank to acquire the necessary money. For the bonds to end up in the central bank, it must conduct an open market purchase. This action increases the monetary base through the money creation process. This process of financing government spending is called monetizing the debt. Monetizing debt is thus a two-step process where the government issues debt to finance its spending and the central bank purchases the debt from the public. The public is left with an increased supply of base money.
  • Hyperinflation completely destroys the purchasing power of private and public savings. No one wants to hold paper money, so it leads to excessive consumption and the hoarding of real assets. Investors face uncertainty and refuse to invest, unemployment skyrockets, and savings flee the country. The best-performing stock market in 2008 was Zimbabwe, which offered people a way to hedge their currency risks, even as their economy plummeted.

(Business Insider, Jan 28, 2010) Japanese Hyperinflation Could Turn The Dollar Into Toilet Paper

http://www.businessinsider.com/japans-hyperinflation-nightmare-2010-1?op=1#ixzz1GaHRzmvI

Frequently billed as a highly stable country, Japan's dark secret is that it should have exploded into a hyper-inflationary death spiral years ago.

Worse yet, it could easily take the U.S. financial system and U.S. dollar down with it. That's because the U.S. depends on Japan to fund its own debt binge.

We're not alone here. These concerns have been heavily informed by the research of Societe Generale. Japanese hyperinflation would be disastrous exactly because it goes against what most investors have been taught to expect

  • Keep in mind that Japan's bond market is the second largest in the world.
  • "As Japan's retirees age and run down their wealth, Japan's policymakers will be forced to sell assets, including US Treasuries currently worth $750bn, or Y70 trillion eight months worth of domestic financing. At nearly 10% of the outstanding US Treasury stock, this might well precipitate other government funding crises."
  • A declining population thus means that more debt is needed for funding, but fewer Japanese are able to buy it. That's the feedback loop that could trigger an explosion of hyperinflation.
  • "So who will fund the Japanese government's deficit in the future? It is not likely to be the international capital markets, especially if its bonds are offering only a 1.5% yield. But if international investors were to demand triple that, pricing JGBs in line with international bond market peers (all priced too generously in my opinion) the game would soon be up because Japan's current debt service already amounts to 35% of pre-bond issuance revenues."
  • The yen would rapidly depreciate as it became clear Japan was at risk of debt default. In a debt crisis, Japan would likely be forced to either devalue the yen in order to wipe away debt values or default on all of its’ own people.
  • Now the American crisis -- America would be in trouble since it would probably lose its second largest debt buyer
  • U.S. bonds yields would rise and the dollar would be under pressure. Japan would likely be selling foreign assets in order to shore up its finances. These assets would include its enormous holdings of U.S. bonds. Less demand for bonds would require higher interest rates to clear the market, all else equal.
  • Rates are forced to rise, which makes debt less manageable and puts the government under pressure. Then markets push interest rates even higher since the government looks like it's having trouble handling its debt, making the debt problem even worse.The dollar keeps tanking

There's been a lot of talk about the idea of a (peaceful) "national divorce" as the Left continues to abandon everything that made America what it is. Well, this week's guest on "The Glenn Beck Podcast" is all for that divorce. Michael Malice is the author of "The Anarchist Handbook" and host of the podcast "Your Welcome." He joined Glenn to talk about how an anarchist would peacefully take on America's greatest challenges — with a smile.

"My rights are not up for discussion," Malice told Glenn. He explained why his version of America will save America, and why, in spite of anxious talk of "national divorce," he has so much hope for the future.

Watch the video clip below or find the full episode of "The Glenn Beck Podcast" here:


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There are new curriculum standards being implemented into schools throughout the nation for health classes that not only go far beyond what's appropriate for young children, but are entrenched in clear political biases, too. Under the standards, third-graders are taught about hormone blockers and endless gender identities, and topics get shockingly graphic for kids as young as 11. Some schools are even teaching their teachers and kids to ignore what parents have to say about these topics. And the worst part may be that many parents are completely unaware what their children are being taught.

Tina Descovich, co-founder of Moms for Liberty, joined "The Glenn Beck Program" to explain exactly what you can ask at your next school board meeting to ensure this "horrifying" curriculum isn't being taught in your kid's school.

Watch the video clip below:

Want more from Glenn Beck?

To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.

It should come as no surprise that a newsworthy story receives more media coverage when released on a Monday than a Friday. The reason is in part due to a large number of news-consuming Americans checking out for the week to focus on their weekend plans rather than the news.

On Monday's radio program, Glenn Beck shared information that President Joe Biden decided to release on Friday — when fewer people would notice — regarding the Climate Finance report. This report is marketed to Americans as "A Roadmap To Build a Climate-Resilient Economy." But Glenn believes the report to be Biden's Great Reset warning shot to banks.

In this clip, Glenn warned that if Americans don't stand together, in eight years we all indeed will own nothing. Watch the clip for the full story. Can't watch? Download the podcast here.



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On today's radio program, Glenn Beck was joined by Bill O'Reilly to discuss the top stories of the week.

For O'Reilly, the biggest story this week centered around someone mysteriously missing from mainstream media news reports today: Mark Zuckerberg. Specifically, O'Reilly said it's the 'scandalous' way the Facebook CEO spent nearly $420 million to influence the 2020 election — and did so successfully.

Watch the clip to hear the full conversation. Can't watch? Download the podcast here.

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To enjoy more of Glenn's masterful storytelling, thought-provoking analysis and uncanny ability to make sense of the chaos, subscribe to BlazeTV — the largest multi-platform network of voices who love America, defend the Constitution and live the American dream.