Bank of Japan to Pursue Qualitative and Quantitative Easing - Double Their Monetary Base

Along with most monetary enthusiasts I was anticipating a significant announcement from the BOJ two day policy meeting this week, and this seems to be it.  They are going with an aggressive set of both qualitative and quantitative easing with the express intention of weakening the Yen and creating monetary inflation.

Japan will be firing up their industrial policy using the weaker yen to create more foreign demand for their goods to make up for the slack domestic demand based on their declining demographics.

As you may recall, Japan has been unable to stimulate their economy despite spending rather significant sums on infrastructure and other stimulus projects.  The lack of reform in their fairly well entrenched and pervasive crony capitalist keiretsu structure, which one might say is about a half step removed from outright feudalism, has resisted all their best attempts at livening things up.

And the declining demographics of an island nation that discourages immigration is certainly no help either.  But I would not discount the tax that corruption and inefficiency plays in dampening GDP growth, post bubble.  Corruption creates inefficiency, fraud, and malinvestment, always and everywhere.  Just ask China.

This major policy shift to inflation may help to explain the relentless hammering of the precious metals, which are the only rival currencies that cannot be doubled by the stroke of a bureaucrat's keyboard.

Look for more competitive devaluations from other countries, both explicit and implicit.  This is the more conventional aspect of the currency war, and is a perennial favorite of the political class.

The more secular aspect is the seismic shift of the US dollar reserve currency regime which has been in place since the end of WW II.  That bit of monetary exotica will make this currency war one to remember.

DailyFX
Yen Weakens as BoJ Introduces Qualitative and Quantitative Easing
By Christopher Almeida
04 April 2013 05:10 GMT

THE TAKEAWAY: The Yen weakened as the Bank of Japan introduced Qualitative and Quantitative Monetary Easing including an increase of JGB purchases.

At the end of the two day meeting, the Bank of Japan announced that they were introducing a ‘Quantitative and Qualitative Monetary Easing’ program with an aim to achieve the price stability target of 2 per cent in two years. The Bank announced that it will now use ‘monetary base control’ in pursuing quantitative monetary easing which involves carrying out market operations that will expand the monetary base by 60-70 trillion Yen per year.

The Bank will also increase Japanese Government Bond purchases as well as increasing the average remaining maturity of about 3 years to 7 years. As a result of these, the Japanese Central Bank has decided to terminate the Asset Purchase Program with the outstanding purchases being absorbed into the JGB program. 

In their statement, the policy makers stated that Japan’s economy was showing signs of a pickup with overseas economies seen to be growing at moderate paces. Despite the year on year rate of change of the CPI for Japan being negative recently, the Bank sees that indicators are suggesting a rise in inflation expectations...

Rest of the article with Yen Chart here.
 

Financial Times
Bank of Japan to double monetary base
By Ben McLannahan in Japan
April 4, 2013 6:05 am

Haruhiko Kuroda has announced his arrival as governor of the Bank of Japan by introducing a “new phase of monetary easing”, doubling Japan’s monetary base through aggressive purchases of long-term government bonds and risk assets.

Read the entire article here.

Are All G20 Bank Depositors Exposed to a Cyprus Style Seizure of Deposits for a 'Bail-in?'

Dave from Golden Truth has let me know of an interesting quote from an article by Eric Sprott titled Caveat Depositor which *could* explain why countries like New Zealand and Canada are quietly tilting towards seizing bank deposits to recapitalize failed banks.

"If there is a risk in a bank, our first question should be: ‘Ok, what are you the bank going to do about that? What can you do to recapitalise yourself?’ If the bank can’t do it, then we’ll talk to the shareholders and the bondholders. We’ll ask them to contribute in recapitalising the bank. And if necessary the uninsured deposit holders: ‘What can you do in order to save your own banks?’”

Jeroen Dijsselbloem, March 26, 2013

Apparently this template has already been agreed to by the G20 according to Dave.

"Because the use of taxpayer-funded bailouts would likely no longer be tolerated by the public, a new bank rescue plan was needed. As it turns out, this new "bail-in" model is based on an agreement that was the result of a bank bail-out model that was drafted by a sub-committee of the BIS (Bank for International Settlement) and endorsed at a G20 summit in 2011.

For those of you who don't know, the BIS is the global "Central Bank" of Central Banks. As such it is the world's most powerful financial institution. I sourced a copy of this Agreement here: LINK...

...the agreement references specifically avoiding more taxpayer bailouts. It also refers to bank deposits in excess of Government insured amounts as "uninsured creditors." This is essentially the standard legal bankruptcy model which uses creditor hierarchy (secured lenders, unsecured lenders, preferred equity, equity) and applies to the rescuing of banks.

This is very important to know about and understand because what is commonly referred to as a "bail-in" in Cyprus is actually a global bank rescue model that was derived and ratified nearly two years ago. It also means that bank deposits in excess of Government insured amounts in any bank in any country will be treated like unsecured debt if the bank goes belly-up and is restructured in some form.

Because this is a legal Central Banking agreement that will be applied globally, it also means that U.S. bank depositors will not be immune to this rescue mechanism. It means that no one should keep any amount in any bank that exceeds the FDIC guarantee. In fact, I would recommend only keeping enough money in the bank to fund your monthly or quarterly bill paying requirements. Any amount in excess of FDIC deposit insurance will be exposed to the risk bankruptcy."

You may read the entire article at Dave's blog Golden Truth.

I would assume that if Dave's reading of this document is correct, unless there is a specific and unequivocal denial by your local government Administration, then this is the operative plan for another series of bank failures in the G20 countries, including the US, Germany, France, Italy, and the UK.  This would explain how these stealthy depositor seizure plans have been bubbling up from diverse countries.

I would not be satisfied if there was merely a dismissal of the possibility, that Cyprus was somehow a 'special case' because of the way in which their banks were capitalized, and so heavy with deposits.  In the event of a global derivatives meltdown, no capital structure will stand, and no bank can maintain a so-called 'fortress balance sheet' while they are gambling wildly with speculative leverage on the side.

I do not wish to seem to be an alarmist, but this additional information and some of the other events which are occurring has created a rather significant shift in my thinking.  Cash is not cash and deposits are no longer deposits as we once thought of them in this non-transparent, post-Glass Steagall financial world of ours. 

Congratulations. You may now be an unsecured creditor of your local TBTF bank if your and yours have any money on deposit there, either directly or indirectly.    You say you have money in a pension fund and an IRA at XYZ bank?  Oops, it is really on deposit in you-know-who's bank.  You say you have money in a brokerage account?  Oops, it is really being held overnight in their TBTF bank.  Remember MF Global? 

Who can say how far the entanglements go?  The current financial system and market structure is crazy with hidden risk, insider dealings, control frauds, and subtle dangers.  Jim Chanos says that the  cheating is so widespread and unpunished that it becomes almost a fiduciary responsibility to break the rules.

 No wonder people are so edgy.  I think the plutocrats have gone too far, but are so detached and out of touch that they have not figured it out yet.  And when the awaking comes, it will be quite a surprise to many.

To my correspondents who say they have spoken to their elected representatives about this and received assurances, I would not assume that they are aware of this international agreement which the US has presumably signed.  I was not.

And if you think they will stand up against any plans to take your deposits during a banking emergency, against a vociferous and overwhelming flood of objections from their constituents, remember how quickly the Congress caved on TARP and Cyprus' Parliament gave way to the EU and ECB.

Welcome to the abyss.

Remembering the 45th Anniversary of Martin Luther King's Last Speech

“The tyrant dies and his rule is over;  the martyr dies and his rule begins.”

Søren Kierkegaard

Martin Luther King's Last Speech

3 April 1968, Church of God in Christ, Memphis, Tennessee



On 4 April 1968, Dr. Martin Luther King, Jr. was assassinated.

"O Jerusalem, Jerusalem, you who kill the prophets and abuse those whom God has sent as messengers to you.

How often I have longed to gather your children together, as a hen gathers her young under her wings. But you would not let me.

As you willed, your house is now yours, but is made desolate.’”

Gold Daily and Silver Weekly Charts - Canada Takes Cyprus Model - Bolivar Failing - Global Pigfest

There was a very obvious hit on the precious metals market today. You could not miss it if you were watching the tape intraday.

I have posted some commentary on that here and here.

The Non-Farm Payrolls Report is on Friday. The ADP report came in light today, and ISM Services missed as well.

There were a couple of surprises today in that things which we have seen are now starting to penetrate the mainstream consciousness.

Jim Chanos observed that the moral hazard is now so bad that 'cheating is a fiduciary responsibility.' Nice tone that the governments are setting in Washington and London.

Even nations are getting in on the action as Venezuela is allowing the financiers to front run its devaluations.

"Unlike the first devaluation however, the second was done behind closed doors with local financial interests placing bids on dollar exchange transactions ahead of the country’s citizenry...

The chart shows that when measured against gold, the Venezuelan Bolivar has “collapsed” from Bs. 860 in 2005, to what appears to be over Bs. 20,000 today. This represents an over 23-fold move (2300%) in gold over the last eight years.

Additionally, the CBC seems to have confirmed that Canada is concerned about bank failures and is adopting the Cyprus model for their own bailout plans.

It seems a bit dodgy that both NZ and Canada have taken these steps, while reassuring everyone, rather smugly, that their banks cannot fail.

Are you kidding me?  In the event of a major global derivatives event, I would imagine that nothing in the banking system is safe.

And lastly, I hear from Bloomberg that American Banks with European money market funds intend to deal with their negative returns by quietly 'breaking the buck.'  Bail-in, everybody.

If the above does not give you a sense of foreboding then you may wish to check your pulse.

And with the gold and silver action we are seeing, and the dissembling about the safety of the banking systems and the economy,  it is as if the local authorities are trying to keep people on the beach, generating commercial activity by spending money and saving paper currency, while they themselves make their own provisions for an incoming tsunami of financial disaster.

Right. I'll send you a postcard from higher ground, eh?

Have a pleasant evening.