Japan Floundering Under 260% of GDP Debt

 I remember in 1987 when I got my securities license.  It was the month of September and happened to be right before Black Monday which took the US DJIA down 22.6% in a single day!  It continues to be the largest single day drop recorded by DJIA. (Dow Jones Industrial Average)  I really didn't have any clients in the market because I really didn't have any clients yet so I just stood by and listened.  There were no computers and no cable TV so we basically had to come to the office on Tuesday and all read the Wall Street Journal to figure out what had happened.

Of course as America was feeling very poorly about itself with high inflation, low production, crappy cars and a crappy stock market, Japan was riding high.  The world looked at Japan in the 80's and 90's as the whiz kid of the world.  They could do no wrong!  Their employees were happy, they made incredible cars and they had virtually no crime throughout the entire country.

But it's hard to stay on top forever.  Just a few weeks ago Japan saw it's largest single-day stock market drop EVER.  They started borrowing money 20+ years ago to finance the things they couldn't afford anymore and today their debt stands at 260% of GDP which is almost DOUBLE what the US Government owes.

A little over a week ago, a financial crisis erupted into the headlines as the unraveling of the Japanese yen carry trade led to the biggest two-day drop in Japanese stock market history.

While everything appears calm for the moment (at least, as I write this article), know this - it's not. What took place last week is only the beginning of a much larger financial crisis, and it's going to get far worse before it ends. The only question now is how quickly will it all unfold? A growing crisis is inevitable, and the reason is simple...

The Bank of Japan is trapped.

Back in May, I wrote "6 Potential Triggers for the Next Global Financial Crisis." The second trigger listed was a Japanese currency crisis:

"Meanwhile, the world's fourth largest economy is on the verge of a major currency crisis. The Japanese yen currently sits at its lowest level relative to the U.S. dollar since 1990. To prevent the situation from getting worse will likely require the Bank of Japan to raise interest rates or the U.S. Federal Reserve to lower interest rates. Given the recent persistence of inflation, it's unlikely we'll see the U.S. lower rates in the short-term (absent a major financial crisis). This means the Bank of Japan may be forced to raise rates and take other measures to defend its currency.

But this will cause a number of problems. First, the Japanese economy is in recession. Raising rates will only make the problem worse. Second, Japanese government debt stands at over 260% of GDP. Believe it or not, that's twice as bad as the United States. 

Raising rates means more interest on the national debt, potentially sparking a debt spiral that could destroy the country. Furthermore, if the Bank of Japan starts hiking rates, this could cause a reversal of the yen carry trade (succinctly explained here), which could quickly lead to a disorderly unraveling of financial positions all over the world. Along the way, we could see margin calls and exploding derivatives positions that crash global financial markets."

As you can see, the Bank of Japan can choose one of two roads:

1) Raise Interest Rates and Destroy the Domestic Economy - Raising rates will strengthen the yen. But as we saw last week, it will also lead to a reversal of the yen carry trade with enormous implications for global financial markets. It will also weaken the Japanese economy, and increase the interest paid on a Japanese government debt load too onerous to ever be paid back. In addition, it puts further strain on the Japanese banking system by increasing the amount of unrealized losses on bank balance sheets - likely resulting in bank runs. Ultimately, raising interest rates will destroy the Japanese economy.

or

2) Lower Interest Rates and Destroy the Domestic Economy - Likewise, lowering rates will cause the yen to depreciate relative to other currencies (in particular, the dollar). While it will decrease the stress on Japanese bank balance sheets and the amount of interest paid on the Japanese government debt, it will unleash domestic inflation sure to ravage the finances of the average Japanese citizen. 

More and more of the average household budget will be earmarked for essentials, and discretionary consumer spending will contract. Worst of all, increased fossil fuel prices will weigh down every aspect of the economy, as Japan remains heavily reliant on imported oil. And that oil needs to be purchased in dollars using an ever increasing number of yen. Ultimately, lowering interest rates will destroy the Japanese economy.

In case you missed it, the big takeaway is this - no matter what the Bank of Japan does, the result will be the same. And, as the fourth largest economy in the world, the destruction of the Japanese economy (whether through a deflationary spiral or hyperinflationary collapse) will severely weaken the entire global economy. Moreover, this is happening while almost every other industrialized nation in the world is on the brink of economic calamity due their own problems with over-indebtedness.

That's why this crisis is far from over. In fact, just ahead of us is the greatest economic and financial crisis in history.

When the dust settles, the world will find itself trapped in a system indistinguishable in both capability and function from the mark of the beast system outlined in Revelation 13:16-17 - setting the stage for the roll out of the actual mark of the beast system. How will that happen?

Several interim steps stand between the current crisis and the global financial tyranny the Bible tells us is coming. I believe those steps are as follows:

STEP #1 - Continued Volatility

Expect to see continued volatility in global financial markets. Anticipate bear markets in stocks, real estate, and corporate debt in the United States, Japan, Europe, and almost every nation in the world. In the days and weeks ahead, expect to see a number of major financial events dominate news headlines. We may even see an epic crash in one or more of these markets. Expect to see increased job losses across all industries. However, these events will only be the beginning of the economic turmoil. The worst is yet to come.

STEP #2 - Debt Hits Its Limit

Eventually, the world will hit peak debt. The ability of consumers, corporations, and governments to take on new debt will hit its limit. Our current monetary system is a debt-based monetary system. This means in order to continue functioning properly, it requires the creation of ever greater amounts of debt. Essentially, it's no different than a Ponzi scheme.

Here;  From Global Financial Crisis To The Mark Of The Beast In 10 Steps (prophecynewswatch.com)

The Bible says a day is coming when everyone on earth needs to have a mark on their body in order to buy or sell anything.  Cash will be worthless and a new system of digital currency needs to be rolled out.  How can that happen?  When faith and confidence collapses in the Japanese system it could tear into the faith and confidence of the US Dollar.  When that happens the world will demand a new reserve currency to replace the US Dollar.  And that currency WILL BE a digital currency that will one day be controlled by the Antichrist.

We don't know if this will all happen before or after the rapture.  As we have written before, we tend to believe it will happen after the rapture because UP TO the rapture people will be marrying, planning marriages, eating, drinking, planting crops and building houses.  In essence everything will be "about normal".

Collapsing the US Dollar and the entire global economy will certainly put a temporary halt on all of these activities.

So be ready!