Silver Doctors

Jim Willie is back with his latest public Hat Trick Letter discussing the impending massive stock market collapse (and subsequent QE3), gradual awakening of the sheeple, and predictions of a massive autumn rally for gold and silver. (We couldn’t agree more)

-Thanks also to the Golden Jackass for mentioning SilverDoctors twice in the members’ August Hat Trick Letter!
Readers interested in subscribing to his excellent service can do so at http://www.goldenjackass.com/

This week has been tumultuous. The best summary in my view is to conclude that the Gold price set a record high, and fully revealed what direction it will take this autumn. In the low volume vacation dominated days of summer, an opportunity to engineer a selloff has begun in earnest. Gold has gone down to $1765 and Silver to $40 flat, still way up on the year. Hats off to Ben Davies, who has been impressively accurate in his precious metals forecasts. He nailed the silver forecast in April, expecting a steep pullback to $35. We saw it!! In June, when Gold was trading in the low $1500 level, Davies boldly forecasted that Gold would break above $2000 by year end 2011. The strong upward moves seen so far in August have captured global attention. After action last week, Davies fine tuned his 2011 gold call, stating he expects Gold to reach $2100 by the end of December after first a correction to $1675. Today we saw it!! The hefty pullback will lose some faithful followers, but offer savvy investors a great chance to add to their positions. The cartel is busy making countless grateful Chinese, Indians, and Asians who have not stopped buying precious metals in defense of rapid inflation. They see the American bankers as the inflation villains. The sudden pullback has assured the last fire sale before the autumn gold bull romp, a great trampling event to come. It is written, it will happen.


The big down move today signals even bigger upward moves in the next few months. The money is moving quickly today on Wednesday. The 10-yr USTreasury has rallied on the TNX from 2.14% to 2.21% as a decent move. The crude oil price is up from $85.40 to $86.10 as a modest move. Nobody can deny that panic has hit the stock market, as the recession can be seen without rose colored glasses. Expect much more debasement of the USDollar, as tax revenues fall and stimulus costs rise. The bigger USGovt deficits must be financed, during a truly hostile climate. The complete ruin of major global currencies is in progress, not stoppable.


Prepare for $2100 gold by January, and $60 silver by January. The last open door is being made possible in the final days of August. Like last year, the months of September through January will be ones for the history books. The start of big bank failures in the United States, London, and Europe should add to the gold run. Contagion has hit Italy, Spain, and France (the newest PIGS lookalike). The breakdown will be broad, deep, and frightening in the next few months. The twisted thinking is probably that gold must be brought down as much as possible, to make a lower base before the next gigantic upward moves beyond the $2000 level and probably past $2100. The gold breakout will capture global attention and make major headline news. This is 2008 all over again, but much worse!! The story line will be that nothing was fixed, but that nothing can be fixed, and much more debasement of money will come. The Gold Meter will rise in direct reflection.
Read more:

Is JP Morgan preparing for an imminent onslaught of silver longs standing for delivery in September???

Just yesterday we reported that on Monday JP Morgan adjusted 19,003 ounces of silver from eligible supplies into registered vaults- the VERY FIRST OUNCES OF SILVER ever to appear in JPM’s registered vaults.

In today’s CME warehouse silver inventory report, JP Morgan adjusted another 781,915 ounces of eligible silver into their registered vaults yesterday- nearly ALL of their eligible silver supply!

Is JP Morgan gearing up for the Wynter Benton group (or any other trader with just $1.3 Billion) demanding delivery in September of the remaining 32.75 million ounces of silver in the COMEX?

COMEX SILVER INVENTORY REPORT 8/24/2011

*Brink’s had a small withdrawal of 1,006 ounces from eligible vaults

*The Delaware Depository had a small withdrawal of 9,009 ounces from eligible vaults

*HSBS had a small withdrawal of 4,990 ounces from eligible vaults

*JP Morgan adjusted nearly all of their eligible silver (781,915 ounces out of 962,160 total) into REGISTERED VAULTS

*Scotia Mocotta had a large withdrawal of 630,512 ounces from eligible vaults.

*TOTAL COMEX REGISTERED SILVER Inventories increased by JPM’s 781,915 ounces to 33,538,485 ounces
*TOTAL COMEX ELIGIBLE SILVER Inventories declined to 71,732,144 ounces
*TOTAL COMEX SILVER INVENTORIES declined to 105,270,629 ounces.

The CME has raised initial and maintenance margins from $7,425 and $5,500 to $9,450 and $7,000 respectively.

Violent multi-wave cartel smashdown in gold and silver.  Check.
Coordinated CME margin hike in gold. Check.
Gold and silver back below $1764 and $40.  Check and Check.

QE3 is looking more likely by the minute.

CME Gold 8.24

1:1?

Our friends at Dont-Tread-On.Me have compiled a list of 11 reasons why silver is headed to parity with gold.
As we have indicated numerous times that we expect the silver/gold ratio to reach a MINIMUM of 5:1 by the end of the bull market, and potentially temporarily reach 1:1, this is obviously a must read for our readers.

“For the first time in history, silver coin, of the leading nations of Europe sold at a higher price than gold coin. This of course does not mean that silver is more valuable than gold, merely a silver dollar or shilling is worth more than a gold dollar or shilling.”
Silver the World Sensation in 1919-1920
January 24th, 1920

Read Silver Shield’s entire Case for the 1:1 Silver/Gold Ratio here:

Cartel successful in driving silver down to $39…silver now down $3 on the day, $5.50 since Tues afternoon.
It appears they are attempting to run the stops and challenge major support at $38. 
As stated earlier, we can see this continuing at least through Friday morning prior to The Bernank’s statements.
Again, remember that silver options expire tomorrow, and The Bernank gives The Fed’s FOMC statements Friday from Jackson Hole.  Yesterday and today is simply classic cartel action.
The cartel is literally as predictable as The Doc’s grandmother.

Use their predictability to your benefit by using the discounts to accumulate MORE OUNCES of physical!
Continue to professionally accumulate INTO this price weakness! This means here and now!

Gold has now been smashed $150 lower from Monday night’s highs down to $1764, silver has been knocked $4 down to $40.42, and the raids continue.

Shell-shocked gold and silver bugs have apparently crashed Kitco.com, as numerous readers are reporting the site is now down, which we confirmed when we attempted to pull live charts.

Could The Bernank actually be planning to publicly announce QE3 on Friday?
Official QE3 on Friday is starting to look like a possibility as the cartel increases the intensity of their attacks on gold and silver.

Again, look to professionally respond to this weakness and BTFD!

Gold and silver corrected hard yesterday, and have continued to correct this morning.

Silver was attacked as soon as it reached $44.50 yesterday, as the cartel found it critical to prevent silver from clearing $45 for obvious implications.

Silver was attacked in 3 waves, traditional for cartel take-downs. 
After wave 1 yesterday, we wrote that we looked for strong support to emerge at $41.50, which had previously provided resistance for silver on 3 occasions. 
Silver bounced precisely at this level yesterday, running nearly a dollar higher to $42.50.
The strength of the support at $41.50 is clear just from yesterday’s chart as it supported silver for much of the afternoon while silver regained enough strength to crawl back above $42.
From there, silver’s slide continued however, and this morning we have broken support at $41.50, dropping all the way to $40.79.

It now appears clear that silver will retest $40, particularly as tomorrow is options expiration for silver, and the Fed meets at Jackson Hole on Friday.
Expect the beat-down to continue, as options expiration days as well as days in which The Bernank makes public statements are almost mandatory for silver suppression as far as the cartel is concerned.
As such, it now appears likely that the cartel will attempt to stuff silver back below the critical $40 level. 
If successful, look for major support to emerge at $38-$38.50.  We don’t expect the cartel to be successful in breaching this support absent several consecutive margin hikes.  Should silver reach this area near $38, we will be buying silver with BOTH HANDS, and recommend you do the same.
Following The Bernank’s statements Friday afternoon, look for both gold and silver to scream higher in the afternoon trading session and into the access market hours, particularly if The Bernank increases the strength of his easing rhetoric (much less if QE3 is actually announced).

Gold has corrected nearly $100 already from $1917 to $1820.
Much of what has been said about silver also applies to gold, although gold was definitely more over-extended than silver, and was due a correction.
For those concerned with gold’s correction over the past two days, please recall Jim Sinclair’s words from several weeks ago as gold neared $1764:

1. Those holding gold to hedge the systemic risks of the Western financial world simply stay in your position.
2. Traders lighten up your positions as gold approaches the next two Angels.
3. No market fails to have reactions at some point.
4. Reactions in this market will be deep, but brief when they occur.

Sinclair’s next two angels after $1764 are $1848, and $1936.

Thus, the gold master Jim Sinclair has advised those holding gold to HOLD YOUR POSITIONS, but advised that significant deep, yet brief corrections in gold are likely as gold approached $1848 and $1936.
Gold has responded almost precisely as Sinclair predicted, with corrections starting at $1815 and $1917.

We re-emphasize Sinclair’s call to HOLD YOUR POSITIONS, (outside of exchanging gold for silver of course) as gold is headed much higher from here long term.

So relax, sit back, pop a bag of popcorn with Sterling and don’t let the cartel’s shenanigans over the next 2 days get the best of you- QE MUST CONTINUE as NOTHING HAS CHANGED!

We can hear you clicking your calculators multiplying your Phyzz X $500…..

Part 2

BrotherJohnF’s Silver Update- Chinese Chess

Germany is likely to push for European gold reserves to be used as collateral. The Deputy Chairwoman of the Christian Democrats is an astute woman and politician and knew exactly what she was saying. Indeed, she echoed other senior lawmakers who in May called for Portugal to consider selling their gold. Two leading governing party members – Norbert Barthle, Germany’s governing coalition budget speaker and his counterpart Carsten Schneider from the Social Democrats, the biggest opposition party, urged Portugal to consider selling some of its gold reserves to ease its debt problems. They called for a review of Portugal’s request for financial aid to include gold and other potential asset sales. The German people and lawmakers realize that the euro is being debased and lawmakers realize that gold may offer protection from the debasement of the euro but also from sovereign default and systemic contagion. Some of the PIIGS (to use the unfortunate and unfair acronym) have very sizeable gold reserves – especially Italy which alone has some 2,452 tonnes of gold. Portugal has 421.6 tonnes, Spain 281.6 tonnes, Greece 111.7 tonnes and Ireland has just 6 tonnes. The ‘German PIIGS gold collateral’ story is a very important one that is unlikely to go away. Indeed, it may be the story that helps educate those not familiar with economic and monetary history and with monetary economics and who do not understand gold and why gold remains valuable and remains a safe haven asset and currency today.

From Goldcore:

All major currencies are lower against gold today with the Japanese downgrade and concerns about global growth taking their toll on Asian stock markets. While European indices have eked out gains, some selling of peripheral European debt has been seen again and yields on German bunds have risen.

Cross Currency Table
Gold is trading at USD 1,844.80, EUR 1,276.10, GBP 1,117.90, CHF 1,456.50 and JPY 141,225 per ounce.
Gold’s London AM fix this morning was USD 1,850.00, EUR 1,279.30, and GBP 1,119.58 per ounce (from yesterday’s USD 1,886.50, EUR 1,301.75, GBP 1,138.64 per ounce).
The long expected correction in gold began yesterday and gold fell 1.6% in dollar terms. Traders taking profits after the recent price surge led to the falls yesterday.
In trading terms, gold’s recent price appreciation of nearly 17% in one month had been excessive – although completely understandable given the scale of the crisis facing the global financial and economic system.
Another very significant development for the gold market took place yesterday when an influential member of Germany’s ruling coalition, Ursula von der Leyen, said that Germany should follow Finland’s lead on Greece and seek collateral for loans from bailout countries and the collateral should preferably be gold.
Ursula von der Leyen is a senior German minister; deputy chairwoman of the Christian Democrats (CDU) and is a potential rival to Angela Merkel. It is unlikely that she would have made a solo run on this if she had not had a prior discussion with Merkel or at the very least with her government colleagues and lawmakers.
Government officials and anonymous government sources were quick to distance the chancellor and her government from Ms von der Leyen’s demands but Merkel herself did not comment and did not reject the call.
CDU finance spokesman Michael Meister said the call for periphery nations to give their gold reserves as loan collateral was a distraction. “The most important thing is that central banks retain independent control of their own gold reserves,” he said.
However, German officials were in full damage limitation mode.  The maxim ‘never believe anything until it is officially denied’ may be appropriate.
Germany is likely to push for European gold reserves to be used as collateral. The Deputy Chairwoman of the Christian Democrats is an astute woman and politician and knew exactly what she was saying.
Indeed, she echoed other senior lawmakers who in May called for Portugal to consider selling their gold.
Two leading governing party members – Norbert Barthle, Germany’s governing coalition budget speaker and his counterpart Carsten Schneider from the Social Democrats, the biggest opposition party, urged Portugal to consider selling some of its gold reserves to ease its debt problems. They called for a review of Portugal’s request for financial aid to include gold and other potential asset sales.
The German people and lawmakers realize that the euro is being debased and lawmakers realize that gold may offer protection from the debasement of the euro but also from sovereign default and systemic contagion.
Some of the PIIGS (to use the unfortunate and unfair acronym) have very sizeable gold reserves – especially Italy which alone has some 2,452 tonnes of gold. Portugal has 421.6 tonnes, Spain 281.6 tonnes, Greece 111.7 tonnes and Ireland has just 6 tonnes.
The ‘German PIIGS gold collateral’ story is a very important one that is unlikely to go away. Indeed, it may be the story that helps educate those not familiar with economic and monetary history and with monetary economics and who do not understand gold and why gold remains valuable and remains a safe haven asset and currency today.  (World Gold Reserve Chart – Wikipedia)

Misguided ‘Gold Bubble’ Callers Out in Force Once Again
Gold remains overbought in trading terms and due a correction but the continuing simplistic talk that gold is a bubble is again misguided. It is a simplistic call based on assumptions and not based on the fundamentals of the gold market.
Some of the people calling gold a bubble today have been saying gold was a bubble when it reached $850/oz in early in 2008.
There remains a massive lack of understanding of what is happening in the gold market and very significant developments in the gold market are ignored due to a lack of knowledge and in some cases due to bias and ignorance.
The fact is that those who claimed gold was a “barbaric relic” and a “useless commodity” have gotten gold spectacularly wrong.
This is because gold is not just a commodity. It is much more than that – it is money. Money that cannot be created at a whim and debased by politicians, bankers and central bankers.
It is also a safe haven asset and safe haven currency that has no counter party risk as it cannot default.
This is why gold is in demand today by astute people, governments and central banks.
This is why central banks internationally were net buyers of gold in 2010, and will be in 2011and 2012, and almost certainly throughout this decade.
This is why the People’s Bank of China is building their gold reserves without declaring it to the world and is encouraging their citizens to buy gold.
This is why overnight Kazakhstan has given its central bank a ‘priority right’ to purchase all domestically mined gold “in full”.
This is why Chavez has nationalized the Venezuelan gold industry and is repatriating Venezuela’s gold reserves.
This is why Bild, the best selling daily newspaper in Germany urged their readers to buy gold two weeks ago.
This is why senior German government officials are calling for the gold reserves of European countries such as Greece, Portugal, Spain, Italy and Ireland to be used as collateral for future loans.
Importantly, gold is a store of value unlike other assets, and unlike fiat currencies such as the US dollar, pound and the euro.
For the latest news and commentary on financial markets and gold please follow us on Twitter.
SILVER 
Silver is trading at $41.89/oz, €29.02/oz and £25.46/oz.
PLATINUM GROUP METALS 
Platinum is trading at $1,863.50/oz, palladium at $761/oz and rhodium at $1,800/oz
NEWS
(Bloomberg)
Merkel Rejects Seeking Collateral in Bailouts
(The Irish Times)
Derek Scally: Merkel rejects ally’s call to use gold as bailout loan collateral
(Bloomberg)
Central Banks Seen Retaining Gold to Help Manage Debt as Bullion Advances
(Bloomberg)
Gold Rallies After Dropping From Record
(Bloomberg via Financial Post)
Repatriation of gold from abroad to start soon, Venezuela says
(Bloomberg)
Kazakhstan Gives Central Bank ‘Priority Right’ to Buy Gold
(Reuters)
Gold rebounds on Japan downgrade, physical buying
COMMENTARY
(MarketWatch)
Gold $3,000?
(MarketWatch)
China’s Gilded Gold Market
(King World News)
Rickards – Chavez’s Gold Leased to JP Morgan, Barclays, HSBC?
(You Tube)
Rickards Says Libya’s Gold Bullion May Never Be Found
(You Tube)
Jim Rickards – Gold is Money – $7,000 Gold Price
(Wall Street Journal)
Checking In On that ‘Gold to $10,000′ Call
(The Telegraph)
Trackbacks Relax, Central Banks Can Still Save Us
(ZeroHedge)
A (Hopefully Fake) Paul Krugman Laments The Lack Of Death And Destruction Following Today’s Earthquake
(ZeroHedge)
Doug Casey: Exiting The Eye Of The Storm
(Economic Policy Journal)
Roubini’s Off the Wall History of Financial Crashes
(Barron’s)
Parabolic price action in gold suggests short-term caution while long-term bull market continues

*Update- While Zerohedge is describing this rumor as “idiotic” we now have an official denial of the rumor from BOA:

• BANK OF AMERICA SAYS JPMORGAN MERGER SPECULATION IS `BASELESS’
• BANK OF AMERICA DISCUSSES MERGER SPECULATION IN INTERNAL MEMO
• BOFA REPEATS IT HAS NO NEED TO ISSUE ADDITIONAL COMMON STOCK

We seem to recall a quote regarding official denials- Believe nothing until it is officially denied.

Does this mean the take-over is imminent, or just an “idiotic rumor” as per Zerohedge?

The Zombie that is JPM must be fed. 
Assets acquired for nothing in the Bear Stearns looting (acquisition) have been burned and the sharks must now turn and feed on each other.
The two financial arms of the US gov’t (JPMorgan and Goldman Sachs) will be assisted/preserved at the cost of every other bank and financial institution if need be.
If JPM or GS goes under, so does the $1 quadrillion credit default swap interest rate suppression scheme, and with it, the US dollar.

From 24/7 WallStreet:
There is a rumor circulated on Wall St. that JP Morgan will take over Bank of America within the week. The government will support the deal with a $100 billion investment in preferred shares issued by the combined entity. Alternatively, the government may guarantee the value of a large pool of Bank of America assets. The word is that Treasury Secretary Geithner has discussed the transaction with JP Morgan CEO Jamie Dimon. The “merger” would completely destroy the value of BAC’s common shares.

Fortunately, no Fukushima-like nuclear disaster so far in the wake of today’s earthquake in Virginia.
As to what happens when “The Big One” hits Southern California, that’s another story.

Don’t expect any changes to the nuclear industry status quo such as a return to coal power or solar/wind power on a widespread basis anytime in the foreseeable future.

Meanwhile, nothing like making sure you have a whopping 3 days of fuel to run backup generators at a major nuclear power plant.

August 23, 2011 7:16 p.m. EDT
(CNN) – Tuesday’s Virginia earthquake triggered the shutdown of a nearby nuclear power plant and spurred declarations of “unusual events” at plants as far away as Michigan, U.S. authorities reported.
Dominion Virginia Power said both reactors at its North Anna plant, less than 20 miles from the epicenter of the magnitude-5.8 quake, shut down after the first tremors. Amanda Reidelbach, an emergency management spokeswoman for Louisa County, said the plant vented steam, but there was no release of radioactive material.


David Heacock, the utility’s chief nuclear officer, said the 1,800-megawatt plant was operating on emergency power and the two pressurized-water reactors were safely deactivated.
“The plants are designed for this kind of a seismic event,” Heacock said. “There is no apparent damage to anything at the plant right now.”
Heacock said the plant had four diesel generators supplying backup power and that those generators had three days of fuel. Crews were still working to restore off-site power to the plant Tuesday evening, the utility said.
Read more:

Boom.
Unlike S&P, Moody’s didn’t wait for the weekend to announce the latest sovereign debt earthquake:
Moody’s has just announced a downgrade of Japan from Aa2 to Aa3, outlook stable.

Perhaps Moody’s has now realized that an over 200% debt to GDP ratio is unsustainable?
Singapore, August 24, 2011 — Moody’s Investors Service today lowered the Government of Japan’s rating to Aa3 from Aa2, concluding the rating review that began on May 31. The outlook is stable.

The rating downgrade is prompted by large budget deficits and the build-up in Japanese government debt since the 2009 global recession. Several factors make it difficult for Japan to slow the growth of debt-to-GDP and thus drive this rating action.

Over the past five years, frequent changes in administrations have prevented the government from implementing long-term economic and fiscal strategies into effective and durable policies. The March 11 earthquake and tsunami, and the subsequent disaster at the Fukushima Daiichi Nuclear Power Station, have delayed recovery from the 2009 global recession and aggravated deflationary conditions. Prospects for economic growth are weak, making it more difficult for the government to achieve deficit reduction targets and implement its Comprehensive Tax and Social Security Reform plan.

Support for the stable outlook comes from the undiminished home bias of Japanese investors and their preference for government bonds, which allows the government’s fiscal deficits to be funded at the lowest nominal rates globally. We believe that this funding cost advantage will be sustained by considerable institutional and structural strengths, which will prevail even with large budget deficits in 2011 and 2012.

The rating action does not affect the Aaa country and bank deposit ceilings, the outlooks for which remain stable. Those ceilings act as a cap on ratings that can be assigned to the obligations of other entities domiciled in the country. Japan’s short-term rating is unaffected and remains unchanged at P-1.

RATINGS RATIONALE

The global financial crisis has had a severe effect on Japan’s economy.
The current government now forecasts a primary budget surplus (excluding interest payments on government liabilities) by 2020, versus the former Koizumi government’s target of a budget surplus by 2012. Headline general government budget deficits will remain approximately at or above 7% of GDP through 2015, according to the Cabinet Office’s “prudent” projection, well exceeding nominal GDP growth rates and thereby contributing to the inexorable rise in the debt-to-GDP ratio.

Large deficits and the collapse of growth since the early 1990s have led to an overhang of government debt that is by far the largest among the major advanced economies. That assessment holds true based on either the International Monetary Fund’s (IMF) 2011 projection of 233% of GDP or the Cabinet Office’s projection of 181% (the IMF has a broader accounting definition). Moreover, neither the IMF nor the Cabinet Office foresees containing or reducing the debt burden over the next decade under the current policy framework.

The March earthquake and nuclear disaster may make it difficult for the government to stay under its JPY44 trillion annual budget borrowing ceiling (which excludes special reconstruction bonds) in the current or next fiscal year, though the government’s new Medium-Term Fiscal Framework for 2012-14 repeats its commitment to adhering to that target.
The government estimates that the total fiscal cost will be 5% of the current year’s GDP, but that will be spread over 10 years.

The March earthquake also undermined Japan’s recovery from the 2009 global recession. Consumer spending has softened further and deflationary pressures have intensified. Also, the strength of future investment growth is more uncertain even though supply chain disruptions are normalizing. This is because power capacity will be reduced from the loss or suspension of supply from nuclear power plants in Fukushima and elsewhere in the country. Japan’s economy has been in recession for three consecutive quarters from October 2010 through June 2011.

In particular, the consequences of the Fukushima Daiichi Nuclear Power Station disaster have not fully played out, and it is not yet possible to precisely quantify its impact. The government may be exposed to contingent liabilities even after it establishes a special compensation entity that places the burden on the nuclear power industry. Furthermore, reductions in the national power supply from a crippled and suspect nuclear power sector would intensify headwinds against economic growth.

These developments further hamper the economy’s ability to achieve a growth rate strong enough to steadily reduce the budget deficit. Although the government and ruling party unveiled a comprehensive fiscal reform plan on June 30, which identifies a broad range of measures to be taken, it lacks precision. In addition, a divided Diet and tensions within the ruling Democratic Party of Japan risk both the timing and implementation of the reform plan. Indeed, the imminent change in the party’s presidency and the election of a new prime minister reflect the factious nature of the country’s politics.

While the government sees as feasible its medium-term policy target of a halving of the primary budget deficit (excluding interest payments) to approximately 3% of GDP by 2015, assuming the government doubles the consumption tax to 10% by the middle of the decade, its ultimate goal of achieving a primary surplus by 2020 would require additional, and yet unidentified, fiscal measures. Moreover, even under the government’s more vigorous and optimistic economic growth scenario, a decline in the debt-burden trajectory would remain elusive.

CREDIT SUPPORT FACTORS

Japan’s very large economy and very deep financial markets provide the wherewithal to absorb economic shocks. Its dependable domestic funding base provides an exceptional home bias for the government, which can fund itself at a lower nominal cost than any other advanced economy.
Furthermore, throughout the global financial crisis, in the months after the March earthquake, and in recent days with renewed turmoil in global markets, JGBs continue to demonstrate exceptionally strong safe-haven features.

Related to Japan’s home bias is its strong external payments position, which insulates the country from global financial market shocks. In addition to a seemingly structural current account surplus on the balance of payments, its net international investment position at more than 50% of GDP is the largest of any industrialized advanced country, and is almost twice as large as that of Germany. In fact, net income receipts from overseas assets provide a bigger contribution to the current account surplus than the trade balance.

The steady appreciation of the yen to post-war highs is a headwind against export competitiveness, although the lack of price and wage inflation in Japan somewhat offsets this effect. Even if exports falter as a source of economic growth, we expect Japan’s external position will retain its strengths.

And although the government’s June 30 Comprehensive Tax and Social Security Reform plan is not fully worked out, it will help to sustain market confidence if, in the not-too-distant future, the government executes policies on a timely basis and economic growth recovers to support the fiscal adjustment process.

CREDIT TRIGGERS FOR A FUTURE RATING ACTION

Credit-positive factors that could lead to a positive ratings outlook and could eventually lead to a ratings upgrade:

1. Well-established progress in achieving fiscal consolidation targets

2. A robust and sustainable recovery from the recession

Credit-negative factors that could lead to a negative ratings outlook or prompt a ratings downgrade include:

1. A delay in implementing the comprehensive tax and social security reform plan

2. The economy’s inability to recover from the lingering effects of the global recession and the ongoing consequences of the March earthquake, tsunami and nuclear power plant disaster

3. A diminished home bias in the government bond market or substantial erosion in Japan’s external strengths, which at some point would cause the market to price in a risk premium to government debt, making sizable annual refinancing requirements significantly more costly

PREVIOUS RATING ACTION & METHODOLOGY

The last rating action on the Government of Japan was on May 31, when its government bond ratings were placed on review for downgrade.

The principal methodology used in this rating was Sovereign Bond Ratings published in September 2008. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Press releases of other ratings affected by this action will follow separately.

Have you noticed how silent the media has been on the latest massive down-wave in the US housing market since the Federal Tax rebate program expired in April of last year?

New-home sales fall, 2011 could be worst year yet

Sales of new homes fell for the third straight month in July, a sign that housing remains a drag on the economy. If the current pace continues, 2011 would be the worst year for new-home sales in nearly half a century.


Sales fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That’s less than half the 700,000 that economists say represent a healthy market.
Last year, 323,000 homes were sold — the worst year on records that go back to 1963.
While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.
Read more: