Japan Inflates, Gold Jumps

Why Buy Gold? The Bank of Japan is printing two in every ¥3 of Tokyo’s new government debt…THE JAPANESE BANKING CRISIS of the 1990s and early 2000s had roots similar to the American crisis today, writes Gary Dorsch of Global Money Trends.

A stock market and real estate bubble both burst, leaving banks holding $450 billion in loans that were virtually worthless. Japan’s “lost decade” of growth followed, providing powerful evidence of the danger of allowing deflation to emerge and persist.

Under deflation, profits shrink, investment dries up, and consumers spend less in anticipation of even further cuts in prices. And deflation is very hard to remove.

Japanese wholesale prices in February 2009 were 1.1% lower than a year earlier, the first annualized decline in six years, putting Japan on course for its second bout of deflation since mid-2000s. Japan’s economic output contracted at an annualized 12.1% rate in the fourth quarter, meantime, its fastest rate of decline since the 1974 oil shock, shrinking about twice as fast as the United States and the Eurozone due to its heavy reliance on exports – exports which sank by almost one-half last month, driven down by the sharp rise of the Japanese Yen.

Read more….