"Dan, This goes along with one of my predictions for the future from several years ago. I think we will eventually have a wealth tax in this country as well as many others. Germany has already discussed the idea. Scary indeed. Hopefully the Japanese will just go out and buy gold. <VBG>" ===============================================================
Hi Joe,
When you get time, check out Jim Sinclair's take on the Japanese negative interest rate article that was posted earlier.
Japan Gets It Wrong -- Again
If an angry parent says one crude word in front of its three year old, the child learns the word and recites it instantly almost like a mantra. Then the child will yell it out religiously in church every Sunday thereafter.
Well, Japan - whose zero interest rate policy is one of the biggest fiascos ever created by a central banking system, has done it again. The respected Japanese publication, "Shukan Gendal" says that the Japanese Monetary Authority will authorize the charging by banks of a negative interest rate of 3% to 5%.
The article appears to be a trial balloon to the world and to Japanese depositors to see what reaction it will generate.
Yes folks, they want to charge clients for depositing their own money their own bank. This is a text book move to create a higher velocity of money to offset DEFLATION which for a weak currency should remain in the text book.
Rather than yelling it out loud repeatedly to diminish its offensiveness, if the Japanese are anything like North Americans, any mention of "bank charges" will have them skewering their bank managers on flaming chop sticks unless they opt for the more traditional hara-kiri.
Japanese monetary authorities are coupling this initiative of negative interest with an issue of new currency. That effort is to identify to authorities tax cheats and underground money. When the issue of new money is made, old money will be deemed worthless.
If they do this in the present environment, they will accomplish the following in my opinion:
1/ Drive the price of gold significantly higher as Japanese buyers flock into gold bars and coinage with present yen as well as deposits about to be taxed by the banking system. Japanese savers have 12 trillion in their banking system. Imagine what 10% of that would do to the gold price.
2/ Reduce the Velocity of Money since hoarded liquidity will not go into the stock and real estate markets.
3/ Make complete fools out of themselves as the only money that survives negative taxation on depositors is the strongest currency in the world at whatever time it is applied. Negative taxation, as a means to depress a very strong currency in international markets, is successful; while a weak currency that applies negative taxation - like that being suggested for the yen - will drive its currency deeper into the tank.
What Japan should have done early on was find a means of rationalization of the real estate held in its banking system at inflated artificial values to real market values. The US did this when the Savings and Loan Crisis occurred.
The Japanese, blaming their norms of society, did not make such a move at the right time. There is no excuse ever for not facing a problem immediately. That was the Nixon error and maybe Martha's error as well.
It will go down in history as the worst mistake ever committed by a Japanese Monetary Authority. A Samurai warrior would never ignore his opponent if a battle was justified. What happened to Japan? With all due respect to the Japanese Monetary Authority, how dumb can people get?
As reported earlier on jsmineset, Fed Governor Bernanke gave them a smorgasbord of tools to fight deflation and zero bound problems and they picked up his nose hair clippers by mistake in the form of negative interest and a new currency.
Maybe the Fed should also employ a few of Bernanke's suggestions for the US before it's too late here. The US Fed talks like it's carrying a big stick when it's just a wet noodle. Are you listening boys and girls?
The equity market is teetering as we speak. You can pull the equity market back by getting Bernanke's "Electronic Printing Press" going at high speed tomorrow.
However, there are not too many tomorrows after that. After all, 92% of all US money is electronic -- but I expect you know that already.
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