Last night we reported that in the encroaching attempt to globalize the fiat ponzi regime, in Japan’s latest rush to crushTM (sounds even better than race to debase) its currency it would proceed to monetize even more debt, only not its own debt – a strategy that has failed miserably to stimulate inflation for the past 30 years – but that of Europe.
So far so good, and perfectly expected in a monetary lunatic asylum in which coining money without an appropriate collateral backing is actually considered sound monetary policy by Nobel prize winners.
What gives us some hope that there may be at least one sane voice left in the wilderness is the far less trumpeted news overnight that “Japanese pension funds, the world’s second-largest pool of retirement assets after the U.S., will more than double their Gold Holdings in the next two years as the new government pushes for a higher inflation target, according to an adviser to the funds. Assets held by Japanese pension funds in Gold ETP – Gold-backed exchange-traded products may expand to 100 billion yen ($1.1 billion) by 2015 from less than 45 billion yen at present.” The reason for the move is fear that Abe is actually able (unlike last time when his failure was accompanied by an inexplicable case of career-ending diarrhea) to hit his goal of 2% inflation, without in the process sending bond yields so high all tax revenue goes solely to cover interest expense on the JPY 1 quadrillion pyramid of debt and rising. Which, incidentally, according to many traders is the reason for the move higher in gold prices today.
Mitsubishi UFJ Trust and Banking Corp., which introduced Japan’s first Gold ETF in 2010, expects assets held in the product to double over the next several years from 26.2 billion yen as of Nov. 30. Global investors are holding a near-record amount in Gold-backed ETPs that are valued at $139.6 billion, data compiled by Bloomberg show.
Assets held by corporate pension funds in Japan amounted to 72.24 trillion yen as of March 2012, declining 0.9 percent from a year earlier, according to Yasuo Sugeno, director at Daiwa Institute of Research in Tokyo. Of the total, about 72 billion yen were allocated to commodities including Gold through hedge funds, he said Dec. 10.
Government Pension Investment Fund of Japan, the operator of the world’s largest pension fund with 113.6 trillion yen, stays away from commodity investment as 67 percent of their assets were allocated to Japanese bonds, Sugeno said.
Japanese pensions oversee $3.36 trillion, according to human-resource
and consulting services company Towers Watson & Co. Corporate
pension funds in Japan will diversify 72 trillion yen in assets after
domestic stocks produced little return in the past two decades,
according to Daiwa Institute of Research.
So after the rotation, paper Gold Holdings will double to a whopping… 0.03% of all pension fund assets! Now imagine what happens to the price of gold if Japan does indeed succeed in generating inflation, and pension funds scramble to push 1, 2, 5% or more of their assets into gold. Sure enough:
Perhaps it is time for the punditry and the chatterbox media to start considering what happens not when the much anticipated rotation out of bonds and into stocks, which has not happened for 4 years now, and won’t, at least not until the government bond bubble finally pops which will only happen when the central banks finally lose control, but what happens if even a tiny amount of the global pension capital allocated to bonds and/or equities, is rotated into gold.
“Pension money invested in bullion is ‘peanuts’ at the moment,” Toshima
said. “If 1 percent of their total assets shift to the metal, the gold
market would explode.”
Could not have said it better ourselves.