On May 24, a financial analyst and former head trader at the Royal Bank of Scotland spoke on the Hagmann and Hagmann Report regarding the current state of the global economy. Known in the public sphere under the pseudonym of ‘V’, and labeling himself the Guerrilla Economist, this high level insider stated that the Japanese have completely lost control over their bond market, and the threat for a collapse of the Nikkei equities market is very likely.
V: I basically just got this hot off the press, and hot from the board rooms over here. The Japanese, and this is official… I’m going out on a limb saying this, and you can take it for all it’s worth… the Japanese have lost control of their bond market.
Doug Hagmann: V, for financial neophytes like me, what does that mean?
V: What that simply means is… see the stock market has been rising in Japan, as well as over here because of bond prices. Were in a very unique environment where, if the bond market goes bust, you’re going to see the Nikkei go bust with it, as well as real estate.
That also coincides with us. The collapse that is going to occur here, is going to be a trifecta of bonds, stocks, and real estate combined. So when the Japanese have lost control of their bond market, and the yields are getting higher and higher, and the interest rates are starting to climb on it, nobody’s buying it. So right now, the Bank of Japan has ordered all the public pension funds to begin to buy the Japanese debt. – V, Hagmann and Hagmann Report, May 24
The Guerrilla Economist, along with a select few analyst/forecasters who foresaw Japan as being the catalyst for the next global meltdown, predicted the current storm in Japan going back to January of this year. In fact, the roller coaster ride the world experienced in the entirety of Japanese markets this last week not only validates that volatility is out of control for Japanese financiers, but the continuous and fruitless attempts by finance ministers to correct the market chaos through QE and outright halting of their financial systems did little to satisfy investors.
On Friday, BNP Paribas issued a similar warning as the Guerrilla Economist, only not going so far as to confirm that the Japanese bond market was out of control for the government, and central banks. BNP’s focus was on the massive Japanese debt, and what a bond collapse would do for interest rates, and the inability of Japan to deal with that debt once rates begin to skyrocket.
Japan today faces a situation very similar to the US in the 1940s. With the market becoming dysfunctional as the BoJ’s massive buying operations drain the pool of available bonds, the BoJ’s overriding presence in the market each day has increasingly made the JGB market seem like a government-made market.
But a much bigger problem is Japan’s exploding public debt. With the debt already the largest of the developed nations, it could snowball out of control if an upturn in interest rates causes interest payments to escalate. – BNP via Zerohedge
With the global economy so intrinsically tied to itself, what happens in Asia usually spreads in a day throughout Europe and the United States, and vice-versa. Japan’s butterfly is currently flapping its wings, and in a round-about way, is causing an unemployed Greek to turn to prostitution to afford food to eat. In essence, what happens in nearly every major economy now trickles down, in some form large or small, to every other economy.
The events of last week in Japan, where the stock, bond, and futures markets raged in uncontrolled chaos despite trillions of yen in quantitative easing, and an outright halting of the bond market itself, gives strong credence to V’s affirmation that Japan has completely lost control of their bond market, and will result in a detrimental outcome for the rest of their asset based markets.
You can find more financial updates by the Guerrilla Economist at Steve Quayle’s website under the Q Alerts section, and periodically on the Hagmann and Hagmann Report.