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

Countless leaders on the left are now arguing that removing President Donald Trump from office won't be enough — they're now calling for the president's "cult-like" supporters to be "deprogrammed." And it's not just fringe politicians.

During an appearance on "Real Time with Bill Maher" last week, former NBC anchor Katie Couric said, "The question is, how are we going to really almost deprogram these people who have signed up for the cult of Trump."

Former Democratic presidential nominee Hillary Clinton and Democratic Speaker of the House Nancy Pelosi questioned whether the nation needs "a 9/11-type commission" to determine whether President Trump was colluding with Russian President Vladimir Putin "the day that the insurgents invaded our Capitol." Clinton also made sure to include her favorite "deplorables" in her unsubstantiated conspiracy theory:

"But we now know that not just [Trump] but his enablers, his accomplices, his cult members, have the same disregard for democracy," Clinton said to Pelosi.

Washington Post columnist Eugene Robinson and New York Times Magazine's Nikole Hannah-Jones agreed that there is a need for "millions of Americans, almost all white, almost all Republicans" to be deprogrammed and punished, during an MSNBC interview last week.

Now, a story from the Washington Post is also preaching that narrative and even added that we need more restrictions for conservatives on social media and in the broadcast industry.

"So now we have to be deprogrammed? We've heard this over and over and over and over again, for months," said Glenn Beck on the radio program Tuesday. He read through the shocking details of the Washington Post op-ed and discussed the extraordinary dangers of the latest anti-conservative movement in America.

Watch the video below:

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As calls for censorship and restrictions against conservative voices get louder, Glenn Beck said he feels an "awesome responsibility" to speak, not the words he'd personally like to say, but those he believes the Lord would want him to share.

"It's an awesome responsibility, and one that I am not worthy of," Glenn said. "I want to say ... what He wants me to say. And I have to listen very carefully, because I feel the same way you do. But that will get us nowhere."

Glenn said it's time for Americans who are awake — not woke — to come together, no matter which side of the political aisle you're on, and stand with the truth.

"We are the Alamo, we will stand. But we desperately, desperately need you," Glenn said. "We need the people who are awake — not woke — awake. You may disagree with us. We are your allies, not your enemies. And if you will not stand with us in our hour of need, there will be no one left to stand with you in your hour of need. We must all come together, anyone who is awake."

Watch the video below to hear more from Glenn:

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The incoming Biden administration plans to waste no time in overturning much of the progress achieved by President Donald Trump.

On his radio program Monday, Glenn Beck ran through 10 executive orders President Joe Biden plans to announce on "day one" of his time in office — including rejoining the Paris climate accord, canceling the Keystone pipeline, mask mandates on federal land and during interstate travel, and a proposed federal minimum wage of $15 an hour.

Watch the video below:

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Eric Weinstein, managing director of investment firm Thiel Capital and host of "The Portal" podcast, is not a conservative, but he says conservative and center-right-affiliated media are the only ones who will still allow oppositional voices.

On "The Glenn Beck Podcast" this week, Eric told Glenn that the center-left media, which "controls the official version of events for the country," once welcomed him, but that all changed about eight years ago when they started avoiding any kind of criticism by branding those who disagree with them as "alt-right, far-right, neo-Nazi, etc.," even if they are coming from the left side of the aisle. But their efforts to discredit critical opinions don't stop there. According to Eric, there is a strategy being employed to destroy our national culture and make sure Americans with opposing views do not come together.

"We're trifling with the disillusionment of our national culture. And our national culture is what animates the country. If we lose the culture, the documents will not save us," Eric said. "I have a very strongly strategic perspective, which is that you save things up for an emergency. Well, we're there now."

In the clip below, Eric explains why, after many requests over the last few years, he finally agreed to this podcast.

Don't miss the full interview with Eric Weinstein here.

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