“Whop… whop… whop… whop… whop…” (the sound of rotor blades in the distance)…

Reuters reports former Federal Reserve chairman Ben Bernanke met with officials from the Bank of Japan (BOJ) in Tokyo yesterday. The details aren’t public—but you can bet a helicopter was involved…

No, not a real chopper… “helicopter money.”

Bernanke earned the nickname “Helicopter Ben” for his endorsement of a radical central bank stimulus approach.

Central banks already print money out of nothing to buy government bonds. That process is known as “quantitative easing,” or QE—banker speak for money printing.

But Bernanke’s “helicopter money” stimulus has the central bank conjure the cash then cut a check direct to the government (or even direct to the people).

The government then uses that money to fund massive infrastructure programs and/or tax rebates. It’s an unprecedented way for central banks to “juice” an economy. The infrastructure programs put people to work… get them spending again… and raise inflation.

At least that’s the theory…

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“Helicopter Ben” knows Japan’s suffering economy is a fertile ground for his brand of radical monetary experimentation. Here’s why…

  • The BOJ has turned Japan into the most distorted market on Earth. The economy has suffered five recessions over the last 15 years. Its debt-to-GDP ratio is the highest in the developed world (233%).
  • Thanks to QE, the BOJ now owns over half of all bonds ever issued by the Japanese government. That’s over 50% (and rising) in the largest public debt market on the planet.
  • The BOJ’s now also a top-10 shareholder in over half of all Japanese public companies (through the bank’s exchange-traded fund (ETF) purchase program).
  • In January, the BOJ plunged Japan into negative interest rates. Every Japanese bond under 20 years in duration now sports a negative yield.

The BOJ hoped these radical measures would weaken the value of the yen… increase inflation… goose exports… and thereby “jump-start” the economy. But the opposite has happened…

Chart

Now the BOJ finds itself in a serious crisis…

The value of the yen has risen. It took 125 yen to buy a U.S. dollar one year ago. Now buying a dollar takes just about 100 yen.

That’s a 20% move in just one year—an enormous shift for a major world currency. It’s the complete opposite of what the BOJ wanted.

And instead of spending, the Japanese public is saving more than ever. That’s kept deflationary pressures large… and growing more by the day.

It’s the perfect scenario for “Helicopter Ben” to step in and become “the savior”…

Sane folks would concede the BOJ’s market manipulation has failed. Rational people would back off and let the free market reassert itself.

But hoping for reasonable responses from central bankers and Treasury officials is like hoping for your dog to speak Chinese. It’s just not going to happen…

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Bottom line: The BOJ’s next policy announcement is July 25. Look for a “helicopter drop” to follow. That means any combination of more QE, deeper negative interest rates, and brand-new BOJ-financed infrastructure spending programs.

Take close note of what happens in Japan. It will be the model on which the rest of the world—including the U.S.—launches even deeper into the debt abyss…

(If you don’t have PBRG’s risk-management protocols engaged to protect your own money, do so right now.)