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Japan Brings Us Closer to the "Endgame"

Aug 5, 2016


In the last 24 hours we have come one giant leap closer to the monetary endgame. That endgame, as I've tried to convince you this week, includes an assault on your money, your retirement, and your savings. What happened in Japan last night - or didn't happen more specifically - makes all of that much more likely, and perhaps even sooner than I expected.

I know that for many people it's hard to believe that such a thing is possible. You may think I'm exaggerating or letting my imagination get carried away. But since last summer we've barely been able to keep one step ahead of what the financial authorities are doing. I think we're still one step ahead - but only just.

That means you need to think calmly and carefully - while you have time - about what your strategy is. You know what their strategy is. What's yours? Think about it now.

Japan brings us closer to the "endgame" and the grab for your cash

One quick point about what happened in the last 24 hours. I'm talking about what the Bank of Japan (BoJ) did not do. Many news reports have highlighted the BoJ's decision to double its purchase of exchange-traded funds (ETFS) from ¥3 trillion to ¥6 trillion. That's completely irrelevant.

Here's what the BoJ did not do. It did not take interest rates even more negative. It did not expand its purchase of Japanese government bonds. And it did notannounce helicopter money to get cash and credit directly in the hands of the Japanese people.

This is important. Why?

The BoJ has all but admitted defeat in the money wars! More to the point, I believe the overnight actions shows that the limits of monetary policy to "stimulate" growth or even produce inflation have been reached in Japan. This is a stunning admission from the bank, although few analysts will see it that way at first.

Here's what you need to know right now. The bank's failure puts the pressure squarely on the Japanese government to carry on the war by any means necessary (the war on deflation, which I believe will result eventually in inflation and the destruction of the currency).

There's only one more front though: you.

The government has a simple and urgent problem: how do you get people to spend when they don't want to? I asked that question of you earlier in the week. Today I'll share some more answers. But one last historical note before I do.

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Deadline: 21 September

In the 1930s, Japan had a politician and finance minister named Takahashi Korekiyo. To get Japan out of the Great Depression, he took the country off the gold standard, cut interest rates, and initiated an early version of helicopter money. It seemed to work.

Then, as the head of ministry of finance, he ordered the bank to directly finance government spending. The "debt monetisation" revitalised Japanese industry and pumped money into the Japanese war machine. But when Korekiyo tried to reduce spending on the Japanese war machine, he was assassinated by the military on 26 February 1936.

My point is simple: as central banks around the world admit they are powerless to do anything to produce real economy growth, they will lose their independence. Politicians (Trump/Clinton) will put pressure on them to finance even greater deficit spending and ever-larger government debts. I'm not saying anyone will get assassinated this time. This time the enemy isn't central bankers. It's you.

The Bank of Japan doesn't meet again until 21 September. By then, the political pressure on the bank to join the government in a new assault on deflation may be too strong to resist. That's when you'll see the unveiling of a "super weapon" like helicopter money, or worse. Between now and then you have the equivalent of a cease fire. Use that time to make your financial plans wisely, in a calm and considered fashion, before hostilities break out again. And if you think I'm nuts, circle that date on your calendar and watch.

By the way, I realise some of this might seem remote or unrealistic to you - or even excessively paranoid. After all, this is a problem in Japan not in the UK. But mark my words (which I'm borrowing from a conversation I had with Tim Price a few weeks ago): Japan is the dress rehearsal. The rest of the world is the main event.Please note: This article was first published in Capital & Conflict on July 29, 2016.

Dan Denning studied literature and history, moving to Agora Financial in Baltimore fresh out of college. Working alongside Bill Bonner and Addison Wiggin, he became managing editor of Strategic Investments. He then moved via Paris and London to Australia, publishing a book - The Bull Hunter - along the way, and opened Agora's successful office Down Under. He returned to London in 2015 and became the publisher of Fleet Street Publications' financial newsletters.

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