What is the $12 trillion in cash referencing?
Japanese personal savings.
economagic.com
And this link claim C$16 Trillion, Canadian, in personal savings:
manulife.com
Of course, the number I provided is over a year old, and based upon a stronger Yen/Dollar ratio.
But still we're talking about at least $10 Trillion that can be redeployed elsewhere should the Japanese lose faith in their government's ability to grow/monetize its way out of this tremendous national debt they have accumulated without devaluing their personal savings (ie: retirement) by igniting a currency panic.
That's why the case can be made that Japan should just devalue the yen by say, 20-40%, before the average Japanese saver can clue in and take action to salvage their purchasing power. Dragging this devaluation out too long risks such a panic, because it gives saves a chance to respond and find a safer storehouse of value.
As I recall, when the US devalued the dollar in 1933, we did it by devaluing the dollar against the POG, from $20/ounce to $35/ounce (if I recall correctly). And there was no action that the American public could take to respond to it, since gold was confiscated in 1934, and gold and silver certificates nullified.
This is essentially the same situation Japan faces. They have a national debt which they will never be able to pay off, lacking an economic, or tax base capable of doing so. It has been the incredible savings rate of the Japanese people that has permitted Japan to carry such a national debt. But as they money is withdrawn, either for retirement, or out of fear it will be rendered worth"less" 5-10 years from now, the Japanese will redeploy those savings elsewhere.
I find myself siding with Paul Krugman in that he claims a sudden devaluation equating to a significant percentage of value, is the best recipe for reinvigorating the financial markets and shaking them out of their malaise. The more predictable the BOJ is, the more easily financiers will predict their behavior and act accordingly to preserve their capital. Japan needs unpredictability, imo... Something that wakens them up to looking for opportunities, and not further disappointments.
Hawk |
