Here Comes Europe's and Japan's Debt Crisis - Just in Time for Summer

A good friend of mine, John Shippen, who works in the investment banking industry in Japan, says he totally agrees with my take on the disaster heading toward Japan that I wrote about two days ago. Please refer to: Japan's Collapse Will Be Absolute and it Cannot be Stopped - Here's Some BIG Reasons Why. The only thing about that article that John seems to take umbrage with is my description that the "disaster is heading Japan's way." John says it's the opposite. He says that the disaster isn't coming, Japan is intentionally driving into it... He describes it as, "Japan is a bug that's looking for a windshield."


Hope you got a laugh from that. It's the only one you'll get from this post. 


On that note, an easy article this morning for you referring to the huge financial calamity that is quickly heading our way (or, if you prefer, we are heading full speed ahead towards!) If you live in Japan, better put down that coffee before reading this. Hate to spill!


First a few charts from Mish Shedlock about debt in Europe - Sovereign Bond Yields Sharply Higher in Spain, Italy, Portugal:

This debt crisis has terrible repercussions for the world economy and Japan. Reuters has a good article on it entitled: Europe Poses Global Recession Threat: IMF. The article is a good rundown of the debt problem but the solutions they offer of throwing money at the problem are completely wrong (Been there, done that. Didn't work)... For proof of that, just look at how well throwing good money after bad has done for Greece.


Looks bad. These things have a way of getting out of control. But Japan is OK, right? Because these European countries can't print their way out. Japan can. Let's look at a few charts there. Here's a chart that shows the world ratio of debt to GDP:

Here's one to show Japan's debt mountain in yen:

As an important note, as of 2009, the Japanese national public debt, according to my handy-dandy calculations equaled over ¥6 million yen per man, woman and child in the country (about $72,000 USD). That means that if every single one of us coughed up ¥6 million yen and paid off our total debt today, we'd still be back in massive debt tomorrow as the costs of running the Japanese government, social security and health care, etc., etc. are completely out of control.


As of the writing of this post, Japan's national debt according to the Japanese National Debt Clock is: ¥972, 133,157,539,777 (about $11.8 trillion USD) at debt of over ¥7.5 million per person (about $91,000 USD).

To see what the debt is now, at this moment, go see the Japanese National Debt Clock here.


But wait! Things are getting better, right? Wrong! Here's an article you might want to read from a the New York Times that asks the laughable question: "Could Japan's Debt Lead to a Crisis?" (Let me ask you: "Could the next Pope be Catholic?") But, like I said, that article is a year old. I add it because it is a typical example of the confused reporting emanating out of the MSM... "Everything will be alright as long as government's keep printing money! We have to save the system!"


Well, no. We don't have to save the system. We can't save the system. The system is a wreck.


Here's a much more realistic and sober account of the mess we're in from Global Economic and Market Analysis That Matters: Debt Crisis 2012: Forget Europe, Check Out Japan: 

In addition to the current Euro crisis which we discussed here and here, Japan, the world's third largest economy, could have its own debt crisis as early as 2012 bigger than the Euro Zone.

CLICK ON CHART FOR FULL SIZE VIEW

So as long as Japan could keep financing a majority of its debt internally without going through the real test of the brutal bond market, the country most likely would not experience a debt crisis like the one currently festering in Europe.

But the chips seem to have stacked against Japan now.  On top of the new and re-financing needs, the Japanese government estimated that the economy will shrink 0.1% this fiscal year citing supply-chain disruptions from the earthquake and tsunami disaster in March, the strengthening of the yen and the European debt crisis.  Moreover, S&P said in November that Japan might be close to a downgrade.  After a sovereign debt downgrade to Aa3 by Moody's in August, 2011, it'd be hard pressed to think Japanese bond buyers would shrug off yet another credit downgrade.   

Burgeoning debt, coupled with the global and domestic economic slowdown, and continuing political turmoil (Japan has had three Prime Ministers in the last two years, and the current PM Noda’s popularity has fallen since he took office in September), would suggest it is unlikely that Japan could continue to self-contain its debt. 

I think, as I've said many times before.... The summer of 2012 is going to be a very hot one for Japan - as well as all around the world.

Yen Devaluation Now Imminent? Being Called by Major Financials! Get out of debt - Get your financial house in order now!

Now, after yesterday's report that the main market analyst at China's Caixin Market News and Analysis reports that he is convinced of a 40% devaluation of the Japanese yen is imminent and inevitable, here comes another report hot on the heels from the United States. 

Market Watch reports in: The Yen's Looming Day of Reckoning

Japan is on an unsustainable path of a strong yen and deflation. The unprofitability of Japan's major exporters and emerging trade deficits suggest that the end of this path is in sight. The transition from a strong to weak yen will likely be abrupt, involving a sudden and big devaluation of 30% to 40%.

It will be a big shock to Japan's neighbors and its distant competitors like Germany. The yen's devaluation in 1996 was a main factor in triggering the Asian Financial Crisis. Japan's neighbors must have a strong banking system to withstand a bigger devaluation of the yen.Japan's nominal gross domestic product contracted 8% in the four years to the third quarter of 2011, and six percentage points of that was due to deflation. Without increased government expenditure, the contraction will be one percentage point more. Japan has not seen this kind of sustained deflation since the 1930s.


Without government deficits, Japan's economy will decline much more. Central government bonds and borrowings plus its guaranteed debts rose by 116.3 trillion yen ($1.4 trillion) during the period, equivalent to one-fourth of the level of the nominal GDP in the third quarter of 2011. If Japan had adopted balanced budgets, its economy would have contracted two to three times more. This will lead to a debt crisis in its private sector.

If you are living in Japan then it is time right now to get your house in order.


1) Stop using credit cards immediately
2) Get out of debt immediately
3) Store up at least three months (six months preferably) of food and water to get over the coming financial shock 
4) Protect your wealth by obtaining physical gold and silver


These warnings about Japan's collapse have been coming louder and louder and more often over these past two months. The crash that was predicted by Karl Bass and reported here in Debt in Japan Actually 492% of GDP! UK 497% of GDP!:

...People going along, as usual, in their ignorant bliss. The "leaders" knowing full well what's going on but trying to get out with what they can, while they can! The only difference between the sinking ship and the economy is there won't be any rescue coming for us.

While the entire world watches Greece and Italy, it seems, from looking at this chart, the real action is the UK, Japan, Spain and France. 

Business, government and household debt in Japan show a 492% of GDP problem for Japan. The tax and spend days are coming to an end soon in Europe, the USA and, of course, in Japan. 

This entire house of cards is going to collapse around our heads. When the collapse does come, it will come suddenly. Hope you have cash readily available and at least a few weeks of food and water ready. Because when the crash does come, stores will be empty in a matter if a few hours - if it takes that long.

You've read it on this blog and I seriously warn people to get ready... This could break any day now considering the still simmering situation in Greece, the worsening situation in Spain, Portugal and Italy, tensions and saber-rattling by the USA and Israel against Iran... And now more problems with a world wide move away from the US dollar.


May you live in interesting times.... Indeed. 

"A massive 40% devaluation of the Japanese yen is imminent and inevitable..."

Are you sitting down? I hope you're not drinking coffee right now....

From Zerohedge:


"Caixin's Andy Xie, who is now confident that a massive 40% devaluation of the Yen is imminent and inevitable (with dire consequences for regional trading partners) ... now that the Japanese economy is no longer competitive in the New Normal world (read trade surplus) of delaying what every other central banks has been doing so well.... "


(Caixin is News and Analysis on China's Markets)

I hope you have at least 3 months of food and water stored up and you hold some gold besides being ready for earthquakes and other natural disasters, you should be ready for the man-made one that is coming.

Read more: Four Years of Japanese Central Planning Failure Chart