On the heels of a large surge in gold and silver prices, today Michael Pento warned King World News that a major nation is now close to collapse and their collapse is going to destabilize the entire global financial system. This is an incredibly powerful piece from Pento.
November 15 (King World News) – This Country Will Collapse & Destabilize The Entire World
There is a popular American military term called a “last stand,” which is meant to describe a situation where a combat force attempts to hold a defensive position in the face of overwhelming odds. The defensive force usually sustains very heavy casualties or is destroyed, as happened at Custer's Last Stand. Misreading his enemy’s size and ability, General Custer fought the Battle of Little Bighorn; leading to his annihilation.
The Japanese government is now partaking in a truly incredible measure to expand its QE program in a desperate attempt to devalue its currency and re-inflate asset bubbles around the world. In other words, Japan is constructing its own “last stand.”….
Continue reading the Michael Pento piece below…
In a final attempt to grow the economy and increase inflation, Japan announced a plan to escalate its QE pace to $700 billion per year. In addition to this, Japan’s state pension fund (the GPIF) intends to dump massive amounts of Japanese government bonds (JGBs) and to double its investment in domestic and international stocks — all this in a foolish attempt to increase inflation, which Japan mistakenly believes will spur on economic growth. Japan is now guaranteed success in the destruction of its currency, its economy, and the collapse of the markets it is attempting to manipulate around the world.
To fully understand the Japanese government's misguided reasoning, we have to explore how Japan got here in the first place.
Coming out of World War II, Japan enjoyed three decades called the nation's “economic miracle.” This “miracle” was instigated by a booming post-war export economy helped by prudent fiscal policies, which were meant to encourage household savings. Japan’s standard of living soared to join the highest in the world.
Japan sailed into the 1980’s on the wave of robust economic growth. But governments have an insatiable need to meddle with the free market. Accordingly, the 1985 Plaza Accord was sought to weaken the U.S. dollar and German mark against the yen. The Bank of Japan, in attempting to offset the rising yen, drastically reduced interest rates. The Bank of Japan's loose monetary policy in the mid-to-late 1980s led to aggressive speculation in domestic stocks and real estate, pushing the prices of these assets to astonishing levels. From 1985 to 1989 Japan’s Nikkei stock index tripled to 39,000 and accounted for more a third of the world’s stock market capitalization.
By the late 1980s Japan had transitioned from a “miracle” economy to its infamous bubble economy, in which stock and real estate prices soared to stratospheric heights driven by a speculative mania. Japan’s Nikkei stock market hit an all-time high in 1989 and then crashed, leading to a financial crisis and long period of economic stagnation that Japan remains stuck in. These have become known as Japan’s “lost decades.”
Shortly after the bubble burst, Japan embarked on a series of stimulus packages totaling more than 100 trillion yen — leaving an economy that was once built on savings to be saddled with a Debt-to-GDP ratio that now exceeds 240 percent, the highest in the industrialized world. Making matters worse, the Bank of Japan has more recently engaged in an enormous campaign to vanquish deflation, though the money supply has been in an uptrend for decades. At the end of 2012 we were introduced to Abenomics, which is Premier Shinzo Abe’s plan to put government spending and central-bank money printing on steroids. His strategy is crushing real household incomes (down 6 percent) and has caused GDP to contract 7.1 percent in Q2.
With the rumored delay of its sales tax, Japan is clearly making no legitimate attempt to pay down its onerous debt levels. So one has to assume this huge addition to QE is an attempt to reduce debt through devaluation and achieve growth by creating asset bubbles larger than the ones previously responsible for Japan’s lost decades. This will not return Japan to the days of its “economic miracle,” where the economy grew on a foundation of savings, investment, and production.
Japan is quickly surpassing the bubble economy achieved during the late 1980s. Its equity and bond markets have become more disconnected from reality than ever. The nation now faces a collapse of the yen and all assets denominated in that currency.
This is Japan’s last stand and there is no exit strategy except to default explicitly on its debt. But an economic collapse and a sovereign debt default in the world’s third largest economy will have massive ramifications on a global scale. Japan should be the first nation to face such a collapse. Unfortunately; China, Europe, and the United States will also soon face the consequences that arise when a nation’s insolvent condition is coupled with the complete abrogation of free markets by government intervention.
To learn more about Michael Pento’s financial management services CLICK HERE.
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The audio interviews with David Stockman, William Kaye, Dr. Paul Craig Roberts, Andrew Maguire, Eric Sprott, Bill Fleckenstein, Rick Santelli, Michael Pento, John Mauldin, Egon von Greyerz, Michael Belkin, and Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf — to listen CLICK HERE.