Japan. The Yen. The Hyperinflation.

[notme]

But, deflation is accompanied by a very tough labor market.

[citation needed] especially given my (admittedly anecdotal) experience in an inflationary economy that the job market sucks.

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

Chapter 1, beginning with "Of the Wages of Labour"

Admittedly rooted in sound money economics, which may not directly apply to modern reality.

Could you point out where it states that "In an economy where the value of money is increasing, labor is in small demand"?

'Cause I don't see it.

I'm not sure about those summaries, I would read the source material.  Anyway, it is not always correlated because deflation doesn't cause a tough labor market.

Thank you.

Automation can sometimes cause a tough labor market (in the industry undergoing automation), but that's not the same as deflation causing a tough labor market.

Correct.  I never made that claim.  The quote above is taken out of the specific context of automation-induced inflation that I framed it in originally.

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[myrkul]

Japan is a very strange country as it's basically a vassal state since the USA wrote their constitution after WO2 (which is still in effect) making it unconstitutional for Japan to wage war. For the last ten years or so people are starting to increasingly loudly question the constitution. It will be interesting what happens in the next ten years.

"Article 9 of the Japanese Constitution is a clause in the National Constitution of Japan that prohibits an act of war by the state. The Constitution came into effect on May 3, 1947, following World War II. In its text, the state formally renounces war as a sovereign right and bans settlement of international disputes through the use of force. The article also states that, to accomplish these aims, armed forces with war potential will not be maintained, although Japan maintains de facto armed forces, referred to as the Japan Self-Defense Forces."

http://en.wikipedia.org/wiki/Article_9_of_the_Japanese_Constitution

And the JSDF is pretty much a joke, from what I hear.

[DoomDumas]

http://www.forbes.com/sites/jamesgruber/2013/03/23/japan-is-the-real-crisis/

So, anyone want to place bets as to which currency gets to the "Cheaper to use directly as toilet paper than to buy toilet paper" stage first, the Dollar, the Euro, or the Yen?

I bet on the US

[Spendulus]

Japan is a very strange country as it's basically a vassal state since the USA wrote their constitution after WO2 (which is still in effect) making it unconstitutional for Japan to wage war. For the last ten years or so people are starting to increasingly loudly question the constitution. It will be interesting what happens in the next ten years.

"Article 9 of the Japanese Constitution is a clause in the National Constitution of Japan that prohibits an act of war by the state. The Constitution came into effect on May 3, 1947, following World War II. In its text, the state formally renounces war as a sovereign right and bans settlement of international disputes through the use of force. The article also states that, to accomplish these aims, armed forces with war potential will not be maintained, although Japan maintains de facto armed forces, referred to as the Japan Self-Defense Forces."

http://en.wikipedia.org/wiki/Article_9_of_the_Japanese_Constitution

And the JSDF is pretty much a joke, from what I hear.

Their weapons grade uranium is not a joke.

[hashman]

http://www.forbes.com/sites/jamesgruber/2013/03/23/japan-is-the-real-crisis/

So, anyone want to place bets as to which currency gets to the "Cheaper to use directly as toilet paper than to buy toilet paper" stage first, the Dollar, the Euro, or the Yen?

I bet on the US

Could be a safe bet because the smallest Yen paper bill is 1000 (~10 USD today), and the euro has similarly valued smallest paper bill. 

[myrkul]

http://www.forbes.com/sites/jamesgruber/2013/03/23/japan-is-the-real-crisis/

So, anyone want to place bets as to which currency gets to the "Cheaper to use directly as toilet paper than to buy toilet paper" stage first, the Dollar, the Euro, or the Yen?

I bet on the US

Could be a safe bet because the smallest Yen paper bill is 1000 (~10 USD today), and the euro has similarly valued smallest paper bill. 

Those coins could be rough. On the upside, they're reusable, just wash 'em off.

[townf]

http://www.thedailybell.com/29131/Easing-Policies-in-Chaos-After-BIS-IMF-Attack

some decent stuff in its comment section too

[becoin]

Japan is insolvent, but please don’t worry…

http://nipponmarketblog.wordpress.com/2013/04/25/japan-is-insolvent-but-please-dont-worry/

[wdmw]

Japan is insolvent, but please don’t worry…

http://nipponmarketblog.wordpress.com/2013/04/25/japan-is-insolvent-but-please-dont-worry/

The US has been insolvent for a while now.  Once we can't prop up the FRN by driving the global oil trade, we'll see hyper-inflation.  I'm betting the Euro will crash first, though.

[rikur]

This lady has been putting out nice updates about the Japanese situation:

http://youtu.be/AR3TyfKTeNE

TL;DR; Parasitic rich investors/hedge funds are using near-zero interest rates to borrow from Japan and buying high-yield assets (carry trade) like the european bonds. This will suppress the prices of non-yielding assets like gold and yen and add to the housing/bond bubble. However, there's a high risk that sometime in the near future people will stop accepting the rapidly declining yen and stop buying Japanese Goverment Bonds(JGB) because the yield/risk ratio is off. This should trigger:

  a) hyper-inflation if Bank of Japan(BOJ) continues easing and buys even a bigger share of JGBs
  b) dramatic increase in japanese bond yields (interest rates) that would pretty much destroy the japanese economy that is already spending a large portion of their GDP on interest payments

Bonus: Japan has been the biggest external buyer of US Treasury Bonds(T-Bonds). Once the shit hits the fan domestically, they probably have to stop this. This means that T-Bond yields will increase -> interest rates will increase and the same scenario could take place in the US.

[Spendulus]

This lady has been putting out nice updates about the Japanese situation:

http://youtu.be/AR3TyfKTeNE

TL;DR; Parasitic rich investors/hedge funds are using near-zero interest rates to borrow from Japan and buying high-yield assets (carry trade) like the european bonds. This will suppress the prices of non-yielding assets like gold and yen and add to the housing/bond bubble. However, there's a high risk that sometime in the near future people will stop accepting the rapidly declining yen and stop buying Japanese Goverment Bonds(JGB) because the yield/risk ratio is off. This should trigger:

  a) hyper-inflation if Bank of Japan(BOJ) continues easing and buys even a bigger share of JGBs
  b) dramatic increase in japanese bond yields (interest rates) that would pretty much destroy the japanese economy that is already spending a large portion of their GDP on interest payments

Bonus: Japan has been the biggest external buyer of US Treasury Bonds(T-Bonds). Once the shit hits the fan domestically, they probably have to stop this. This means that T-Bond yields will increase -> interest rates will increase and the same scenario could take place in the US.

Well basically, none of what you said is true, or accurate, in the causal sense, or in the layout of the factors of the situation.

All the major currencies are sinking together, the effect of a dramatic drop in one is similar to poking your finger at an inflated balloon.  The effects are seen in the overall dimensional space, which is not linear a-->b event space.

[rikur]

All the major currencies are sinking together, the effect of a dramatic drop in one is similar to poking your finger at an inflated balloon.  The effects are seen in the overall dimensional space, which is not linear a-->b event space.

Feel free to make your own predictions. Just saying E=mc² or talking about "overall dimensional spaces" doesn't add any value to the discussion.

[townf]

I've got a few related questions.

In general, isn't practically every country, hence the world, in a giant bond "bubble"?

How is it that yields are so low when risk of default is at least perceived to be so high due to the sheer, hulking, clearly impossible amount of the debt itself?

Doesn't the fact that everybody can plainly see the debt growing hyperbolically contribute to the bubble popping risk of the bond market where yields skyrocket one day?

What happens when it pops, like all bubbles do?

What else can happen besides instant default and collapse?

Is all this money printing supposed to keep this bubble from popping in the first place or is it intended to somehow make it magically not catastrophic when it does pop?

If it somehow never pops and the money printing is done and it "worked", is not everybody's taxes going to be like 20 times their income in order to just service the resulting amount of debt?

[rikur]

I've got a few related questions.

In general, isn't practically every country, hence the world, in a giant bond "bubble"?

All G7 countries, yes. (Well, other countries too.. But I think you get the point)

How is it that yields are so low when risk of default is at least perceived to be so high due to the sheer, hulking, clearly impossible amount of the debt itself?

The yields are artificially low. In US and Japan, the central banks are buying ~70% of all newly issued bonds

Doesn't the fact that everybody can plainly see the debt growing hyperbolically contribute to the bubble popping risk of the bond market where yields skyrocket one day?

Yes, but as long as the music doesn't stop you can make big bucks by taking near zero interest loans and invest them in high-yield bonds like Italy/France. Also, if yields start going higher, inflation will increase too. So if you can lock-in with these low rates, you can pay the debt back with cheaper currency.

What happens when it pops, like all bubbles do?

I think that people will stop trusting the Fiat currencies, which are (backed by) debt.

What else can happen besides instant default and collapse?

The debt slavery and austerity will continue and worsen, before people stand up and demand the banks to take responsibility and more equal incomes overall.

Is all this money printing supposed to keep this bubble from popping in the first place or is it intended to somehow make it magically not catastrophic when it does pop?

Yes, QEs are keeping the markets alive but what if FED/BOJ can never pull out?

If it somehow never pops and the money printing is done and it "worked", is not everybody's taxes going to be like 20 times their income in order to just service the resulting amount of debt?

Well it depends.. EU is vowing to end tax evasion, US seems to be heading the same way (Apple). Recently 200GB of tax haven data was leaked, still waiting for action based on the evidence. In a very unlikely scenario, the tax evasion might be stopped and that could cover a massive portion of the deficits.. but I think that it will more likely trigger hyper-inflation (so far we haven't experienced inflation, because while money supply has increased, money velocity has taken a nose dive. If the big money starts to flee from tax havens -> increased velocity -> inflation hits main street).

[World]

It's really happening right now.Bitcoin "Jesus"will be busy
http://www.bloomberg.com/news/2013-05-31/apple-raises-prices-for-some-products-in-japan-on-yen.html

[scooter]

I am sick and tired of these hyperinflation people constantly getting my hopes and dreams up only to have them crushed time after time.

You see, I have a significant tax debt from some mistakes made long ago. Every month I make payments but it will be years before it is paid off.
However, if we experience hyperinflation and the value of the dollar starts dropping 50% per month. Then my debt will simply be inflated away. I can pay it off with pocket change.

I will then rest easy with my bitcoins whilst watching the world burn.

So, unless you people truly see inflation getting close to that 50% per month mark (which is the definition of hyperinflation) Then stop saying it is just around the corner. Because all you are doing is crushing the hopes and dreams of people like me and millions of others who want a way out of their debts to Uncle Sam.

[notme]

I am sick and tired of these hyperinflation people constantly getting my hopes and dreams up only to have them crushed time after time.

You see, I have a significant tax debt from some mistakes made long ago. Every month I make payments but it will be years before it is paid off.
However, if we experience hyperinflation and the value of the dollar starts dropping 50% per month. Then my debt will simply be inflated away. I can pay it off with pocket change.

I will then rest easy with my bitcoins whilst watching the world burn.

So, unless you people truly see inflation getting close to that 50% per month mark (which is the definition of hyperinflation) Then stop saying it is just around the corner. Because all you are doing is crushing the hopes and dreams of people like me and millions of others who want a way out of their debts to Uncle Sam.

And your story (and the millions of similar stories) is exactly why they won't let hyperinflation happen.  Bankers will always prefer deflation, since that gets them paid back.  There will be some defaults, and they won't get it all back, but prices fall and what they do get back can be reinvested at bargain rates.

[becoin]

So, unless you people truly see inflation getting close to that 50% per month mark (which is the definition of hyperinflation)

This is not the general accepted definition.

This is the right one:

The International Accounting Standards Board does not establish an absolute rate at which hyperinflation is deemed to arise. Instead, it lists factors that indicate the existence of hyperinflation:

- The general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power;
- The general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
- Sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short;
- Interest rates, wages, and prices are linked to a price index;
- The cumulative inflation rate over three years approaches, or exceeds, 100%.

[scooter]

Well, that does not really satisfy my Zimbabwean envy.
But I will take 100% in 3 years if I can get it.

[notme]

Well, that does not really satisfy my Zimbabwean envy.
But I will take 100% in 3 years if I can get it.

You won't get it (at least not this decade).... start making plans for this reality. (although a small hedge like pms and/or bitcoin never hurts)