Italy and Japan: marching toward the brink.

Brexit shook up the US Stock Market. It was clearly a black swan. But now, stocks recovered and we are once again told how wonderful things are. Except they aren't. Europe's fourth largest economy (Italy) and the third largest economy in the world (Japan) are struggling to avoid the abyss.

Italy is having problems with its banks. Over 18% of bank loans are 'non-performing.' Which means that the borrowers can not pay. In the US only 5% of non-performing loans created the banking crisis of 2008. Supposedly, the banks did not write off the loans, hoping that with time there would be recovery and that the loans would become 'performing.' But, the recovery did not happen. To make matters worse, a bank deposit rate of -0.4% acts as a break on economic growth. So, Italian banks need a bailout. They got one totaling E80B. That money disappeared and no one seems to know just how much money is needed to do a bailout. Draghi of the ECB is promising a bailout, which raised bond rates, countering the effect of a QE.

The situation is even worse in Japan. Flat growth, declining population and deflation is making life in Japan risky. Reducing bank rates below zero did not work. So, the next gimmick is the "zero coupon perpetual bond." What is this monster? It is a bond that pays no interest and is sold to the Japanese govt and is never repaid. The govt will use these bonds and print more currency to finance more projects. You can read about this here:

http://seekingalpha.com/article/3990353-money-choppers-japan#alt3

How does this differ from money printing? It does not. Mr Abe just wants to confuse the people of Japan. No "honest Abe" is he.

The money printing of Japan and the ECB is pushing the US Dollar upword.