Tag Archives: Graft

Perfect Storm for silver

14 Sep

Usually this blog is a platform for my vexation at the Japanese government and the flaws within the system. However I thought I would turn to a subject that is near and dear to my heart which is that of precious metals and specifically silver

There are most certainly a lot of moving numbers in the calculations and quite a few relatively tweaked assumptions to work off including but certainly not limited to the GSR in the neighborhood of 16. I am unconvinced that we see anything close to that kind of ratio going forward or at least within our lifetimes but I will be happy to be wrong about that. Also one must remember that in addition to the somewhat murky total overall AG recycle numbers there is also the highly significant aspect of alternative methods of production or various alloys that can increase or decrease the industrial demand on silver. Its a bear of a calculation but I believe it worth at least a few minutes of careful consideration per day.

I too have preferred silver to gold mostly because I adore the color of it. Gold has a wonderful allure but silver is just so much more appealing to this stacker. Further I have heard the argument made that “since banks are collecting gold it is therefore the preferred method of maintaining buying power”. I think there are a number of positions one can take to this conclusion but lets stick to the topic at hand shall we ?

I try to keep everything within the perspective of history since it is a subject I enjoy doing in my spare time. It is also convenient for the GSR and precious metals discussions on boards such as this and so I present to you the historic Perfect Storm for silver. I would be prepared to argue that if such an instance occurred in the past there is a distinct possibility of it happening again in the future.

Silver production spiked after the “discovery” and mining of Potosi by the Spanish. There was also an interestingly comparative need for it in China at about the same time due a set of issues that were mostly political in nature. The Chinese were suffering from a series of paper fiat issuances which forced those who used the currency into a “spend it or lose it” situation every time the government changed hands. Chinese copper coins were being used as a measure of value but it was worth more as a medium of exchange than its base metal weight or value so there wasn’t much incentive in continuing the practice. Further the influx of silver into the European continent in such large amounts was causing a drop in its relative value. It was essentially a perfect convergence for silver further magnified by a lack of demand in the Chinese domestic market for European exports while there was a high demand for Chinese exports in European domestic markets which the Spanish had ample access to.

So at the risk of repeating myself, the Chinese wanted silver as a store of value in addition to needing an underlying metal with a relatively fixed rate of exchange to help alleviate their currency concerns. The Spanish in turn had an abundance of Potosi mined AG with a diminishing value going forward and a correspondingly high European markets demand for silk, porcelain and other Chinese goods. A market was established in Manila and the rest is history.

The nukes are coming back online

19 Apr

Its only a question of time now.

A petition to close down Japan’s last 2 operating nuclear reactors was denied by a court in Tokyo this week. I believe this creates a path towards reopening the closed nuke plants once they have been determined to be “safe”. As to how the government is measuring “safeness” is anyone’s guess.

This author is highly skeptical of an energy cabinet and their declarations of safety when prior to the Tsunami the same agency proclaimed the Fukushima plant as safe. Clearly not safe. Yet energy costs are increasingly taking a bigger bite out of the trade balance which may force Abe’s hand sometime this summer when peak demand comes online.

Prior to the Great Earthquake Japan was creating about 30% of its available electric power from nuclear plants. It has also been reported that new sources of uranium have been purchased from the French by the Japanese. Why else would they be buying more fuel ?

It doesn’t take much to connect the dots in this story.

Prices are up ?

24 Feb

Since the LDP swept back into power the Abe government has proudly and often stated that their goal is to increase inflation. As to why the public at large would actually vote for such a proposal is somewhat disheartening and is probably more closely related in a desire to change government from the NDP rather than support for the LDP. Among the people I have talked with, many of them have expressed a desire to do something which is in itself holds some merit. For those of you who don’t quite understand the Japanese mindset, the choice between doing nothing versus something here often results in doing nothing. A lot of time, attention and money is spent in meetings discussing things that are never done, so the fact that people are telling me that they WANT change and WANT something to happen is a leading indicator of more “news” to come.

Perhaps had the general voting public better understood what the Abe government wanted they might have opted for the do nothing approach. In an effort to boost exports the yen has dropped quite significantly. Yet trade has not improved published numbers show an across the board dip in exports. Perhaps that is somewhat attributable to China being approximately 20% of Japan’s market while the Abe government talks tough on the disputed islands. Once again a clear foreign policy failure by the Japanese government who has shored up its domestic support with “China is the problem” comments at the expense of its corporate overseas earnings. I suppose we should wait another quarter or two to see how things transpire but I am not hopeful that things will change.

The drop in the yen’s strength dovetails nicely with an increase in the Japanese governments buying of US debt. So perhaps with tacit agreement by the US, Japan has devalued the yen in an effort to boost sales. We will see soon enough if this is a winning formula. I believe it is perhaps short term “winning” tactic but a long term losing strategy. Japan has not addressed its core issues going forward and is simply creating more debt in the public sector. Further with March 15 tax day approaching, many of the government programs will expire. For example if one wants to buy a “light” car and you want to take advantage of some government support, you need to purchase your car prior to March 15. Last time I checked I heard that qualified candidates might get up to about 800 bucks back on a new car. Cash for clunkers anyone ?

Actually my wife and I will be buying a new light car in the next few weeks so I will try and post something about the experience.

With the yen dropping in value, import prices are rising. Bananas, Gasoline, Meat are all already up in price or scheduled to rise. Yay, your average blue collar family now has less money to spend on education, paying off loans etc. Meanwhile the alleged export boost has failed to materialize. I can’t say how long it will take for the voting public to recognize that they have voted against their own best interests but if the pattern holds true I would say by August or Christmas at latest Mr Abe will start feeling the pressure to announce elections.

Now is the time for him to act. I believe he is going to get the BOJ and finance department changes he wants, further weakening the yen. He has been open in his declarations about the LDP plan so far and he knows better than anyone that his support will fall off going forward. He has to move forward with the LDP blueprint and hope that it shows results.

What has me scratching my head is how inflation among the things the general public consumes is going to benefit the Japanese people. Prices are still too high here and that is after 20 years of deflation. I am certainly not wishing the LDP ill will as my adopted country needs to change course but I honestly don’t believe that Abe’s decisions are best for the Japanese people. Maybe I will be proved wrong, but I doubt it.

Forecast is for stormy skies ahead

5 Feb

Sad to say that it appears things are looking worse round these parts.

TEPCO has received an additional 700,000,000,000 in yen for their Fukushima compensation fund putting the total available at 3,240,000,000,000 yen. Yes that’s 3 trillion yen folks. The monies are to be spent on projects and other expenses related to the nuclear meltdown and are already being poached by the criminal elements in society.

Decontamination crews have had their wages cut or withheld by employers out to milk the system. I would rather not get into the ugly details about what “decontamination” means here but simply put persons using a dirty rag to wipe off a roof tile are part of the solution. Further there isn’t a place to keep the dirty soil so it is put in garbage bags and piled up wherever they can find space. I guess its the heftybag solution to nuclear fallout.

I just read that a toxic smog from China is now floating over Japan. Its not surprising that this would occur due to the following facts;

1. China puts a new coal fired power plant online every 3 weeks and will do so for the next 20 years
2. The quality of China’s coal is marginal and has a very dirty burn resulting in a high particulate rate
3. During Winter the winds blow from the West to the East, thus Japan is downwind from China

People are being cautioned about going outside, especially the young and old. its interesting as many schools have just completed their mandatory student marathon class. Perhaps the air was unhealthy then as well ? I don’t know for sure but it wouldn’t surprise me in the least if it was.

Its hardly scientific but a number of people in my neighborhood have all experienced nausea, vomiting and severe headaches over the past week or so. Perhaps there isn’t a correlation but then again…

Our local newspapers here are now reporting that Mount Fuji has increased pressure. The mountain is starting to vent gas along the NE side. Lakes near the base of the mountain also have heightened water levels of about 1 meter. The entire area is a subduction zone with Suruga Bay pushing under Fuji like an escalator. My neighbor mentioned Fuji acts like a clock erupting every 300 years. The last eruption was 1707.

So its good news all around !

The Abe government continues to devalue the yen so as a result prices are starting to climb at the retail level. Perhaps I have mentioned some of this news before but I thought it prudent to post it in case I hadn’t.

Anyway today we are off the wholesale food shop and to kick the tires at a local car dealer. With some luck we will get a credit approval for a rock bottom low rate on a car loan. Lock in a fixed rate and smile all the way to the bank if and when the Yen hits 150.

End of January Update

31 Jan

Its been too long since I paid attention to this blog so I thought I would post some humble musings for my dear readers.

The Yen has continued its weakening and is now sitting around the 90-91 level. While from outside the country this might be worth a read in the business section or a few thoughts about how one might make some money I have to tell you that it is starting to affect things here. Gasoline prices are about to go up about 2 yen per liter, granted its not a significant change but it is what I believe to be the first in a serious of gradual price rises as the Abe government continues to devalue the Yen.

A very good indicator are food prices. In a country that imports approximately 60% of its caloric intake a weakened yen translates directly to higher prices at the supermarket. Since it is also fairly well known the supermarket margins are razor thin the company has little choice but to pass on the increased costs to its customers. Portion sizes will decrease and prices will continue upwards as long as the Yen continues to devalue. Bananas in particular which are primarily imported from the Philippines are an excellent way to check the relative strength of the Yen. The prices have already started moving higher and the number of them on the bunch are also fewer that before.

Here in town a number of supermarkets that had been in business for decades have closed. Most have reopened under new management but I suspect the number of players in the marketplace have been reduced although I have no proof at the time of this writing that this is in fact the case. Fewer players in the supermarket space will result in less choice for the consumer and additionally put more pressure upon those choosing to service the community under greater pressure not to raise prices without just cause. In my opinion its a very ugly situation that is bound to get worse.

There are other disturbing trends as well. Recently a rich money fund operator was murdered outside Tokyo. He and his wife had led a very handsome lifestyle based out of Switzerland but had returned to Tokyo for some reason or another only to find themselves killed and dumped in a shallow grave outside town. I suspect and have no proof whatsoever that this was in fact a Ponzi scheme operator who had pissed off the wrong investors. The fund had purportedly showed very high returns which in itself is a highly significant story as Japan has had 20 years of deflation. How could this couple show such great returns for so long ? After the economic crisis or what is referred to here as the Lehman shock I suspect they could not access further derivative credit and were forced to return to find new investors. When confronted for a return they could not provide it and were then killed. In classic Japanese manner the alleged murderer tried to drink some kind of toilet cleaner to off himself but failed and is now in custody. The police found him because he was the owner of the land where they found the buried bodies. Seriously you cannot make this stuff up.

The Abe government continues to say their target is an inflationary environment despite the fact that it will adversely affect many of the people who voted for them. Support levels are in the 64-66% range for now. I am fairly certain that by March 15 which is tax day here in Japan we will see the implementation of the national consumption tax rate hike to 10% up from the previous 5%. This will in fact spur a frenzy of buying as folks look to try and maximize their spending capital which the Abe government will turn around and point to as a sign of improvement. Of course it is relatively safe to assume that come the Summertime and demand has fallen off to its previous low points and with the Yen further weakened, higher prices at the gas pump and at the supermarket we will see Mr Abe’s support levels dropping well below 50%.

Its at the point we will find out exactly what kind of politician he is. I for one am looking forward to it.

Turn on the “new” nukes

6 Jan

The news is a few days old but its official. Prime Minister Shinzo Abe has done on national TV and clearly stated that he supports the building of “new” atomic reactors.

He clarified his position by stating that the new nuclear power plants would be improved and that his government should build energy trust with the Japanese public.

http://enenews.com/prime-minister-japan-will-be-building-nuclear-power-plants/comment-page-1

Its a very unpopular position to take as the Fukushima crisis, poorly attempted coverup and criminal neglect has soured the population against nuclear power. Japan does not have any real energy sources and must import it from places such as Indonesia, Russia and Australia.

The nuclear special interest groups bring deep pockets, jobs programs and provide energy for Japans consumers so in the long run it was only a question of time before the atomic power door was opened. Still it should immediately reduce Mr Abe’s support numbers nationwide and bring opposition parties closer together in an effort to oust the LDP from power asap.

In the past Mr Abe has been very vague about many of his positions so for picking up the atomic energy baton and waving the flag this humble blogger can at least understand and support his decision. He actually visited the Fukushima power plant on December 29 and quite likely got a full dose of how “safe” it is now that things have been “cleaned” up.

Now if he can only speak more carefully about foreign policy things might cool down. Recently he has gone public with his wish to “reframe” Japan’s post WW2 apology. The East Asian regional powderkeg simply exploded with reactions. The Koreans in particular have a strong and deep feeling of resentment about the entire issue and it is my understanding that Japanese textbooks do not fully or accurately depict the occupation which further angers the Korean people. The Chinese too who always appear eager to point fingers elsewhere were quick to condemn the statement.

Why is Mr Abe even discussing this ? Its a losing strategy on the international front and his rural and nationalist supporters in Japan are already onboard with his election. It makes little sense and is another confirming indicator that he is flawed leader.

So in the past week Mr Abe has stirred the atomic energy hornets nest, which was more of a required move to take and at the same time has opened a giant can of worms in the region with his “forward” working statement as regards East Asia.

Can’t wait to see what next week brings.

Debt, lovely debt

5 Jan

Today I wanted to discuss the financial situation here in Japan. There are a number of commentators who watch the market and economic conditions here but perhaps my favorite person to listen to is Kyle Bass. The other day I watched a Bass video via Zero Hedge and youtube that featured Kyle saying that the sky would fall and it was a question when it would happen.

He mentions a few pertinent facts;
1. Japan pays 10.5 trillion yen a year interest on their national debt
2. Japan takes in 40-42 trillion yen a year in tax revenue
3. Japan pays almost zero interest to finance their debt

It doesn’t take a rocket scientist to figure out what happens next.

Japan already pays 25% of its total annual tax revenue to service its massive quadrillion yen debt. How much more debt can they possibly sustain ? Its even more disturbing when you consider that very few politicians are talking about paying off this debt. The path is very dark ahead…

Prime Minister Shinzo Abe is already on record saying that rural infrastructure projects are needed. Obviously the money has to come from somewhere. Financial minister Taro Aso has also gone on record saying that government spending and financial “easing” must continue if Japan is to achieve its 2% inflation goal and keep its unemployment levels in the 5-6% range.

Stay tuned

My guess is that Mr Abe cannot finish the job but Mr Aso will take over before the years end.

LDP singing the same old tune

22 Dec

LDP singing the same old tune

Tonight on NHK news there was a round table interview of an LDP representative. There were a series of questions about the nation of Japan and the LDP’s plan for the future.

If you wade through the obfuscation the answers were very simple.

The LDP is going to borrow large amounts of new debt to fuel major construction projects across the country. Earlier this week the new Prime Minister Shinzo Abe had a meeting with the Bank of Japan Governor Masaaki Shirakawa. Shirakawa has an M.A in economics from the university of Chicago and is a DPJ approved nominee who was appointed by LDP prime minister Fukuda. At the time the DPJ controlled the upper house of parliament and kept the BOJ position open for 3 weeks which was a major gaffe and the first time since WW2 that Japan hadn’t had a bank governor.

Mr Shirakawa is most likely going to be replaced as soon as the LDP can muster the time and effort to do so. As a result of what will probably be Shirakawa’s pink slip and the BOJ awaiting its marching orders Abe did most of the talking. The BOJ will fall into the LDP line of promoting inflation, deregulation and economic growth. It then delivered another round of stimulus which has become rather SOP in Japan these days. It will also stand ready to open the spigots of further monetary easing early next year.

The LDP is going to begin construction of new nuclear power plants. This was an easy issue to see through as its only a question of time before the government begins to pressure the various prefectures to turn on their idle power plants. This flies in the face of what appears to be public sentiment, however this blogger feels that Japan is really in a difficult position when it comes to energy consumption. The main obstacle for the LDP to overcome is policy wonk insistence that active faults lie beneath nuclear power plants all across the country. So there will be a gradual insistence from the top that “things are fine” or if they are not “we can restructure things so they will be fine”. Thus overcoming DPJ policy that led to almost every plant closing as they phased in their usual maintenance programs.

How will the younger educated urban people feel about this ? It should be very interesting to see how things shake out going forward. I am hoping it gets testy as it is very unlike Japanese to cause others to lose face. After the Fukushima fiasco, lies and criminal mismanagement I doubt the public will approve of the LDP’s decision. Changes will start brewing shortly after the LDP forces through the policy. It is probably the right decision in the long run but as usual the party doesn’t rule by consensus but rather by edict. It will most likely be their undoing.

Further indicators include the appointment of LDP policy chief Akira Amari as minister in charge of the economic revival. Amari is a well known pro nuke guy. Amari will head the Council on Economic and Fiscal policy which the LDP will use to pass further regulation measures. In a country where regulation is paramount I for one am looking forward to how things will turn out. Will Amari be up for the task ? At 63 years old I would say the jury is still out but I wouldn’t bet on him staying too long.

It appears that Mr Aso who is himself a former Prime Minster will be put in charge of the ministry of Finance as well as becoming deputy prime minister. This blog has a rather negative spin on Japanese politics but I do hold hope for Mr Aso. He is quite capable and unlike Abe knows how to lead. Further posts appear to be held for Mr Tanigaki and Ishihara. Ishihara is a firebrand nationalist politician who has a lot of support from the Japanese conservatives because he speaks his mind and supports popular positions on among other things the Senkaku islands that I wrote about earlier in this blog.

Look for Mr Abe to focus on economics first, and then trying to fix the numerous other issues facing this country. He may quite possibly try and reform the constitution which will have a very interesting affect on the regional powers who carefully watch the Japanese. The last time Mr Abe was in office, his term was most known for a series of scandals, outrage and mismanagement leading to his leaving office and eventually the DPJ taking power.

With 40% of seats in parliament being controlled by the urban voting block I believe that Abe can keep the pork machine doling out enough jobs to keep the rural 60% of seat holders economically satisfied. I think that ultimately the major factor will be if something non economic gets in the way of the LDP’s deregulation and constitutional plans for change.

Abenomics is based on Hope and little else

21 Dec

Abenomics is based on Hope and little else

With the election hype now passed the country can get back into the business at hand. With the new LDP government staring at 20 years of deflation, a stagnating economy, already outrageous prices at the consumer level coupled with more financial printing from Tokyo and a vague promise of inflation does make magic happen. In fact it can be argued that it was the LDP who are responsible for causing the eye popping debt levels in Japan. So we are staring at what is essentially “more of the same”.

Promises of short term cash infusions of approx 2-3 years into already hurting rural communities brought the LDP back into power. This is due to the manner in which political power is determined thus putting the highly educated 30-40 year old urban dwellers in the back seat while the older rural residents get the prime spot at the table. Improving schools and hospitals against earthquake and tsunami is the rallying cry now. Yet here in central Japan the downtown elementary school is closed due to a lack of students. The sales pitch is a lot of hot air. Yes hospitals need to be earthquake resistant but I was under the impression that they were built to withstand earthquakes in the first place. Is the government saying they aren’t and thus must be “improved” ? Only another 10 trillion yen this time and all will be right with the world. From where I sit, something stinks.

Free Trade is dead too. A major LDP insider appeared on NHK tv the other night and said as much into the camera. Japan cannot sign an agreement that threatens to disturb its inefficient and antiquated distribution system nor threaten its pricing policies which keeps the domestic agriculture in business.

The yen will be weakened, yet this has been part of the overall policy of the government for years without success. Are we to believe that because Abe makes a speech and a campaign promise that it is going to happen ? I guess I am from Missouri on this position. Show me Mr Abe, where is the beef ? Yes the yen has moved into the 84-85 range in exchange to the dollar but my understanding is that the goal is about 106-08. Yet Japan must import all its energy and with a weakened yen how will they manage their import energy costs ?

The answer I see will be that the LDP will announce that the nuclear reactors will be turned back on. This will accomplish a few things, reducing costs, providing Japanese energy jobs and offering additional atomic pork to rural communities to provide needed energy to the mega cities.

The clock is ticking on the new PM and his version of the same old medicine just doesn’t add up as I see it. Perhaps having former PM Mr Aso in charge of finance will help to mitigate the oncoming financial disaster we all see coming. Lets hope so, the LDP is going to need all the help they can get. 20 years of financial hell doesn’t go away because the new PM says so.

Sinzo Abe and the LDP win the election

17 Dec

I think that to a certain extent the results of the election here in Japan has more to do with the fickle nature of the Japanese public than any mandate for change. Its been a well documented carousel of prime ministers over the last half decade all of whom go into office seeking a coalition to establish their version of the national vision. Yet within a year of taking office the people sour on whatever slogan or policy had been used to garner their votes and simply vote to oust the former guy in favor of someone with a slightly different spin on things.

There is in fact a cultural obsession with something new. It is so pronounced that often the superior, older more established things are rebuilt so as to appear shiny and new.

The main difference as I see it is that Mr Noda was not only due for the yearly cycle bump out of office but that he was removed in favor of a repackaged candidate who summarily quit office the last time he held the position and perhaps more importantly for telling the truth about the national financial health. Mr Noda sent his message across the nation that a hike of the consumption tax was the best solution for the Japanese Governments spending programs. In order to keep the tap flowing everyone must now pay 10% consumption tax over the previous 5% rate.

Mr Abe on the other hand moved into power by promising a return to the free spending ways of the traditional LDP party. Many of these ancient lawmakers are in fact responsible for the broken financial situation that forced Mr Noda’s hand at the tax increase. Yet Abe-san went out and courted rural districts with pork barrel projects thus ensuring another few quarters of road expenditures. The way politics are apportioned in Japan is somewhat medieval with the rural folks having significantly more pull than the teeming masses of Japan’s urban mega cities. But this is a well known fact.

Japan’s pace of change is in many aspects glacial, but this election is a return to the past and thus a rejection of change in favor of the way things used to be done.

I make no secret that I preferred Mr Noda’s brand of politics because at least he was telling the truth. You could count on the former PM to tell it like it is or at least how he saw it. Mr Noda is truly a self made man, coming up through the system by hard work. Mr Abe on the other hand has again been given the mantle of leadership for being from the right family and having the right connections.

What can we expect ?

More of the old style pork barrel road projects, a return to the governments pro nuclear stance, more spending on unnecessary infrastructure and frankly the return of open graft and corruption with the old traditional and loyal LDP members being rewarded large contracts.

Not to sound overly critical but I think the nuclear position of Japan is in the process of changing. The public perception is that for the most part it is unsafe, yet the industry has greased many wheels and provides both jobs and ‘affordable’ power. Many younger urban people which is by and large one of the largest segments of the population are staunchly anti nuclear due to the criminal neglect, denials, obfuscation and outright lies from TEPCO (Tokyo Electric Power Company). They believe that it is not safe and the folly of neglect that is the Fukushima fiasco underlines their position. Every Friday thousands gather in front of the government building and openly chant “No Nukes!”. This is very un-japanese behavior and has become acceptable both morally and socially.

Essentially Abe represents a return to the past rather than a step forward. The young people I talk with almost universally dislike Mr Abe and they are quite unhappy about his re-election. Further I believe that he is distinctly unpopular among women, people under 40 and urban living older people. However here in Japan the boomers and 65+ silver group hold most of the power. The boomers need the jobs and the silvers don’t want the taxes so it was a perfect storm that resulted in Abe winning.

Perhaps the LDP will attempt to steamroll a national policy of turning the nuclear reactors back on again over local protest groups. We will see how effective they will be in their attempts to move a popular public position to the fringes. Despite what I think will be public outrage it is probably best for Japan to turn the nukes back on and return to the days of steady electric power not reliant upon gas and oil sources. However I feel that the harder the LDP pushes on nuclear policy the less likely urban, educated and younger people are going to like what they are hearing.

I also expect Mr Abe to seek a new working understanding with the Chinese government. There is too much business between the two countries for him not to at least attempt a rapprochement. As to his success in this endeavor all bets are off as the Chinese hold most of the cards in this game. Perhaps they want to smooth things over and are ready to make nice only time will tell.

Regardless of how things transpire, by this time next year if not sooner Mr Abe will be out of the job.

From watching him on TV I think he looks ill and his face discolored and unhealthy so I would put his stay in office at perhaps 6~9 months. He has cobbled together the conservatives and other rural groups in a coalition of government spending programs. His claims of creating inflation and reducing the exchange value of the yen are little more than slogans. When he was previously in charge he did little to nothing using the same tired policies that his party has been using for the past 2 decades without success.

My conclusion is that he will be a rather unremarkable leader who will exacerbate the current account, trade and budget troubles. The special interests hold the strings here so Abe will tow the party line and look to hold on as long as his health lasts. If things go well enough he can hope to call for another election by Summer 2013 or Winter at latest and hand the reins to the next in line.