Interesting article.-Lou
How Japanese Hyperinflation Could Turn The Dollar Into Toilet Paper
Investors are completely unprepared for Japanese hyperinflation.
That’s because hyperinflation seems inconceivable for a nation that has been battling deflation ever since the bust of its stock and property bubbles two decades ago.
Such complacency is made clear by the fact that investors are happy to buy ten year Japanese government bonds with just a 1.32% yield.
They’d be completely blind-sided if Japanese hyperinflation became a reality.
Hyperinflation rapidly makes any currency worthless.
This would be particularly shocking in the case of Japan since many central banks hold yen as a portion of their reserves.
They’d be hit hard by their past decision to diversify away from the U.S. dollar.
“Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two- quarter rout in almost two decades.”
If what was previously seen as a ’safe haven’ currency suddenly lost substantial value, markets would be shaken as many investors suddenly realized they’re carrying far more risk in their yen-related investments than they expected.
Keep in mind that Japan’s bond market is the second largest in the world.
As Japan’s retirees age and run down their wealth, Japan’s policymakers will be forced to sell assets, including US Treasuries currently worth $750bn, or Y70 trillion eight months worth of domestic financing.
At nearly 10% of the outstanding US Treasury stock, this might well precipitate other government funding crises.”
Subscribe