Then we heard from Japan last night (that little island that's just "glowing" with economic activity). They announced a $1.4 trillion "printing/stimulus" package over the next two years. $1.4 TRILLION! Let me put this in perspective for you, this amount will first of all literally double their money supply in 2 years. It is not one $700 billion U.S. TARP plan. No, it's TWO back to back from an island the size of New Jersey! But wait, let me REALLY put it into perspective for you. Do you know how much $1.4 trillion really is? At today's price of gold, it is equal to 7 YEARS of GLOBAL PRODUCTION (what is it about this 7 years stuff? First Germany waits 7 years for their Gold, now Japan does a print job equal to 7 years of global production?).
Where oh where will the Bank of Japan eventually sell these radioactive securities in the marketplace? Especially with the whopping 1/2 of 1% interest that they are paying. AND after telling the world that their currency will be worth almost exactly 1/2 of what it's "worth" now after doubling the money supply? Let me do a little crude math for you here, In 2 years the buyer of a ten year Samurai bond will earn a cumulative 1% in interest... the Yen will theoretically be worth 50% of what it is today if the money supply doubles as they promise, leaving the buyer with a 49% loss. In the words of "Ronco," but wait there's more! What happens if interest rates double to a whopping 1% in 2 years? Another 50% haircut leaving you with 24% of your original investment? Or what if the unthinkable happens and rates go to sky high levels like 2%? Another 50% haircut? I have to stop here because the math is getting just too hard for me... and you get the point anyway, they are announcing a devaluation of the Yen in massive terms.