Silver Dollar Values Prices Soar, U.S. Treasuries Pillars Crumbling Fast, Get Out Now - Gold Prices

Jan. 17, 2013 - PRLog -- Along with the return of Shinzo Abe and his Liberal Democratic Party to control in Japan, the marketplace for US Treasuries might be losing its final external pillar of support. Re-elected on September 26th, Abe has rapidly set a course for endless inflation, saying Japan should "free itself from deflation and also the powerful yen." This really is significant to the international economy as Japan will be the biggest foreign power left having a powerful appetite for US Treasuries. In the event that this demand falters, the Fed might be the only remaining purchaser of new Treasury issues. How High Will Silver Go? Learn More Kitco Silver >> http://www.silverdollar.cc

This political election marks Abe's second turn in the premier's seat. He first held the position from 2006 to 2007, when he abruptly resigned because the first of a string of unpopular one-year premierships. Notably, in the intervening time, the LDP lost its lower home majority to an opposition party for your first time since its formation in 1955. The victors, the Democratic Party of Japan, had been formed in 1998 on a platform of decreasing corruption and making Japan more progressive.

Sadly, as we know from our previous century of encounter in America, progressivism isn't the remedy for an ailing economy. The DPJ was predictably unsuccessful at reining in the bureaucracy, but did handle to push through a damaging doubling of the national sales tax and extra entitlement spending.

Similarly to President Obama's 2008 election, the Japanese individuals had been sold a lot of rhetoric about hope and change and, lacking any sincere options, decided to provide the new guys a shot. The outcomes had been equally disappointing on each sides of the Pacific.

While American voters decided to throw great votes following bad in 2012, the Japanese preferred to return to the devil they know. The only issue is, he's nonetheless a devil.

Abe has basically promised to return to the failed but feel-good policies of LDP government for your last 3 decades; namely, he will prop up failing industrial giants and try to print his way out of a financial slump.

The yen hit a post-war high against the US dollar in 2011 and has remained powerful. For sound-money enthusiasts, this has been trigger for celebration. But for Keynesian demand-siders, it is a crisis. Gold Coins, Silver Coins, Rare Coins  Learn More >> http://www.silverdollar.cc/GOLD-COINS/

Instead of attribute decades of sluggish growth to an interventionist industrial policy, Abe and his cadres are blaming the powerful yen. In response, Abe has called for your Bank of Japan to target a minimum of 3% inflation.

For some time, the only saving grace for Japanese citizens who're unable to locate jobs or secure financing has been that prices have been stable or falling. Abe intends to rob them of that salve while performing absolutely nothing to address the underlying infection.

While some Americans might really feel a self-interested sense of relief that one of the significant dollar-alternatives is being undermined from inside, they're misunderstanding the knock-on consequences of this move.

For your Treasury to continuing getting effective auctions at present rock-bottom interest rates, somebody has to become buying. A lot.

Prior to 2008, most of the demand came from foreign central banks - particularly China. Since the monetary crisis started, China and many emerging marketplace banks have significantly decreased their purchases as well as turn out to be net sellers.

The deficit has been propped up by the Federal Reserve, domestic individual and institutional investors, along with a few foreign holdouts led by Japan. In reality, Japan is about to overtake China because the biggest foreign holder of US government debt.

This really is substantial in that the other two sources of funding - Fed and US domestic - are basically intertwined. The more Treasuries the Fed purchases, the greater inflation becomes, which harms the US economy even further, which leaves domestic funds less wealth to invest in Treasuries. In my view, the foreign influx of capital has been the important third pillar which has kept this vicious domestic cycle from playing out in complete.

Prime Minister Abe's strategy to devalue the yen could therefore be disastrous for each US and Japanese government finances. Because the yen devalues, Japanese domestic investors - who make up the bulk of owners of Japanese Government Bonds (JGBs) - will probably be below intense pressure to sell out and discover greater yields elsewhere.

This flight of capital will threaten Tokyo with default, so the likelihood is the fact that the Bank of Japan will start directly purchasing JGBs on an even bigger scale (as our Fed has done since the monetary crisis) rather than purchasing US Treasuries. They might even turn out to be net sellers of Treasuries in order to finance their bailout of Tokyo while controlling inflation.

This may, in turn, place tremendous pressure on US Treasury investors. Because the outflows mount, the Fed will no doubt announce another plan to purchase Treasuries below the guise of promoting financial stability. When the Fed becomes the permanent crutch of the Treasury, we are able to anticipate inflation to get greater and greater - driving more and more investors out of Treasuries.

It's clear that Washington and Tokyo are but two sides of the exact same coin. Japan's debt-to-GDP is about 212%, while the US has just crossed 100%. Each are extremely dependent on domestic investor interest in government debt to help keep the charade going, and neither have prospects of paying their debts with out real write-downs for investors.

Sadly, neither government is utilizing the time prior to this real crash strikes to even try to shore up their positions. The platform of Shinzo Abe appears poised to undermine Japan's capability to continue subsidizing US government debt. Left with out any substantial external supports, Treasuries will probably be in a very weak position when focus shifts in the EU sovereign debt crisis to our personal tattered finances.

Thankfully, you will find methods for investors to escape Abe and Obama's tandem cliff-dive. Current information shows that China continues to develop a viable option. The South Korean won as well as Taiwan dollar are now considerably more correlated to the actions of the yuan than the yen or the US dollar. These booming financial systems will sustain interest in commodities as they develop real wealth. With the old statesmen of sovereign debt jeopardized, I anticipate the up-and-comers to carry on and turn to gold and silver in droves. My suggestion would be to buy gold and silver and hold for the long term. How High Will Silver Go? Learn More Kitco Silver >> http://silverdollar.cc