Cryptic talk, cryptic messages and perhaps a hidden agenda lies below the rubble of all these chaos, but enough speculation, lets look at the 2 theatres and how their events though separate contributes to the same inevitable outcome of the economy.
The Japanese Theatre: The Earthen God Awakes
We all know what is affecting the Japanese peninsular, but is the Japanese government taking the right measures to help save the Japanese Economy?
"It's panic-selling … Everybody just wants to dump shares," said Retela Crea Securities general manager Yosuke Shimizu in Tokyo. The Nikkei closed 1,015.34 points lower at 8,605.15, having fallen as low as 8,227.63 intraday, when it was down more than 14 per cent
-TODAY online
Suffering a massive plunge, the Japs had a few routes to choose to help prop back their economy. Instead of choosing the proper monetary actions, it chooses to practise the Keynesian dance by printing and flooding the market with cash.
TOKYO - Japan's central bank continued to flood money markets with cash yesterday, bringing its total emergency funding to ¥55.6 trillion (S$882 billion) as it tries to soothe fears about the economic impact of the catastrophic earthquake, tsunami and unfolding nuclear crisis.
-TODAY online
Is such a move justified? In my humble opinion, partially yes, after such a catastrophe, the government should take actions to prop up its economy. But lets ask ourselves, where did the money come from? Did Japan really sell ALL its gold reserves which is estimated to be around 765.2 tons of gold or 46-50 Billion dollars worth of gold.
NEW YORK — Commodity markets reeled on Friday as the massive earthquake that hit Japan sent oil, softs and grain prices sliding on fears over its impact on demand, deepening their biggest decline in months. -Reuters
So even if the Government did sell ALL its gold reserves, where did the rest of the 800+ Billion dollars come from? Tax Payers money? Or did they use the Zimbabwean School of Economics route of unnaturally lose fiscal policy and a quick draw Quantitative easing/ Printing money/ stimulus package solution?
How it affected Commodities/Gold market: Yes, Gold took a temporary tumble from around 1415 all the way down to below 1370, almost a fifty dollar tumble within a few days. But with the middle eastern problem getting worse, and the loose fiscal policy the Japs have, more money is added to the money supply. Where is gold today? Almost breaking the All time High @ 1440 per ounce.
What the Japs should have done: Raising interest rates and contracting money supply, divert resources from consumption to the rebuilding efforts! Expand liquidity when an economy expands, contract the money supply when the economy contracts, the earthquake flatten lots of the Japanese industries, if that isn't a contraction, i don't know what is. The best move they should have done was to escape and cash out the US T-Bills ($900 Billion worth) or Bonds, what good are those treasury bills when your not even going to use it for emergencies!
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