"Once the selling starts, it will be unstoppable"

The endgame is unrelenting chaos

http://www.realecontv.com/videos/capital-market-collapse/once-the-selling-starts-it-will-be-unstoppable.html

The Bug that Roared

It has been said that you can't consider yourself a real global macro trader until you have lost money shorting Japanese bonds. Japan is a bug in search of a windshield – but it keeps dodging. Japan has a debt-to-GDP ratio that is approaching 230% (at a rate of increase of 8-10% a year!). The savings rate (see chart below, courtesy of Kyle Bass and team at Hayman Advisors) is declining rapidly and will soon go negative. At that point, the thought is, Japan will need to seek out foreign investors to buy its bonds. And who will buy a Japanese bond at 1% for ten years? If rates rise only 2%, then Japan would be spending almost 80% of tax revenues on just the interest on its bonds. I would submit that that is not a workable business model.

So traders keep shorting Japanese bonds (JGBs). And they keep losing money. But what if Japanese rates never rose? How could that be, you ask?

Given that Japan will collapse if interest rates rise, I would suggest that interest rates will not be allowed to rise. The Bank of Japan will fire up the printing press for their own version of Operation Twist, but on a scale that will make the other central bankers of the world jealous.

So then Japanese bonds don't revalue (on an internal basis). But the consequence is that the Japanese yen goes seriously south. Can you say 125 to the dollar? 150? 200? Do I hear 250?