Stability in the Japanese government bond market is “extremely desirable,” said Bank of Japan Governor Haruhiko Kuroda in a sign of just how frazzled he was after the turmoil and craziness that his over-the-edge experimental monetary policy has unleashed. But as stability eludes him, he might resort to ever more desperate measures to just hang on.
In my interview with Voice of Russia, I talk about the ECB’s fears for its own existence. I use Spain, which is stuck in an existential crisis, as an example of the greatest “achievement” of central banks: the separation of economic reality from stock markets. And I get a chance to lambaste the French finance minister who is once again barking up the wrong tree.
Unlike Detroit, which will run out of cash next month, Japan prints its own money, so bankruptcy in the Detroit sense is not in the cards. But they do have two things in common: depopulation and a ballooning stock of abandoned houses. For Japan, it’s an issue that even the most prodigious money-printing binge cannot resolve.
Anecdotal evidence has been piling up. Lamborghini sales hit the highest level in 14 years. Ferrari sales jumped 40%. Luxury retailers forecast fat profits. They ascribed it to Abenomics. “The sudden improvement in the stock market led to a big rise in sales at our department stores for luxury brands,” one of them said. But there is a price to pay.
The average Cypriot household had a phenomenal net worth of €670,900 in 2010 – over three times that of German households. That wealth had been sucked out of the cesspool of corruption that the banks and the government were, until neither had a drop of lifeblood left. Now the party is over. And you can almost hear the snickering among European politicians.
There could not possibly be any clouds on the horizon with the Dow and the S&P 500 setting all-time highs, while the German DAX is marching relentlessly towards 8,000 and the Japanese Nikkei is soaring. But just then, a deeply connected representative of the world’s real economy spoils the rosy scenario.
In March, the ECB-organized Eurozone-wide household-wealth survey results trickled out. But when the Bundesbank refused to publish the German data, insiders leaked the reason: too explosive for the bailout era because Italian households were far wealthier than German households. Shocking! And a red herring. The truth turned out to be far more shocking.
In 1969, notes greater than $100, including the cool $10,000 note that would still pay for a lot of things, were retired due to “declining demand.” Prematurely, it turns out. Because demand for cold hard cash, despite plummeting use of it for transactions, has surged. Reason: fear.
Why is it that 17 nations have to fundamentally reorganize themselves and shift sovereignty away from national parliaments to new layers of transnational, beyond-control bureaucracies that can extract untold wealth from taxpayers—just to save the banks?
The ECB and the national central banks of the Eurozone set out to collect “micro-level information” on household wealth. A massive bureaucratic undertaking. Surveys went out in 2010. Results are now ready. No one in Europe had ever done a survey on that scale before. And no one might ever do it again. Because, in the era of bailouts, the results are so explosive that the Bundesbank is keeping its report secret—and word has leaked out why.