Thread by @gladstein

1/ How did Tokyo's Imperial Palace become more valuable than all the land in California?

"Princes of the Yen" tells the story of how central banks shape society, focusing on the US-led effort to stop Japan's 1980s rise by creating an asset bubble

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2/ The film describes how the Japanese had grown into the world's second largest economy through a wartime system of "window guidance," where the Bank of Japan would dictate to domestic commercial banks how much and who they could lend to.

3/ By the mid-1980s, US officials had grown majorly concerned about this kind of "wartime" export-led economic rise, and aimed to find a way to make the dollar cheaper and the yen more expensive, so that Japan's growth would slow at America's benefit.

4/ These objectives were achieved in a series of international meetings, including the 1985 Plaza Accord.

The Yen became stronger against the dollar and Japanese companies became less competitive.

At the same time, the Japanese government was the majority purchaser of US debt.

5/ The next step of the plan, as laid out in the film, was to dramatically expand Japanese credit creation.

Japan's central bank (the BOJ) increased commercial bank loan quotas through "window guidance"

Money became cheap. From '87-'89, banks were practically giving it away.

6/ Japanese banks would, for example, offer newly-wed couples twice what they asked for in a mortgage application.

It became common for middle-class families to own two or three homes.

The easy monetary policies created a massive real estate and stock bubble.

7/ Between 1985 and 1989, Japanese stocks rose in value by 240%, and land rose in value by 245%.

This is when Tokyo's Imperial Palace became worth more than all of the land in the entire state of California.

Japan's territory, 26x smaller than the US, became worth 4x as much.

8/ A single one of Tokyo's 23 districts became more valuable than all of the land in Canada.

The stock market went so crazy that large manufacturing companies opened hedge funds.

At one point, Nissan made more money through speculation than through making cars.

9/ With all the extra money sloshing around Japan also dramatically ramped up its external investments.

These went from a net inflow of $2B to an outflow of $135B in 1986.

Japanese entities bought Columbia Pictures, Pebble Beach golf course, famous art, and companies worldwide.

10/ Critically from a geopolitical point of view, Japan bought 75% of US treasuries issued in 1986.

So the US not only had found a way to begin to break the back of its top economic competitor, but also got Japan to increasingly finance America's debt.

11/ The film argues Japan used its trade surplus to disguise money creation just as the US did in the 50s/60s via the Bretton Woods system.

Currency dealers were blind to the monetary inflation.

But behind the scenes the ratio of non-productive loans to total loans skyrocketed.

12/ Between 1969 and 1989, the value of private sector land in Japan went from 14 trillion yen to 2,000 trillion yen.

The gap between the rich and the poor in Japan -- which had been modest in previous decades -- also expanded dramatically during this time of monetary inflation.

13/ Beginning in 1989, however, the Bank of Japan started changing policies which led to the end of the bubble and ensuing spectacular crash.

In 1991, the Japanese stock market dropped by 32%.

14/ 5 million Japanese would lose their jobs.

Suicide became the leading cause of death for Japanese men between the ages of 20 and 44.

Between 1990 and 2003, *212,000* Japanese companies would go bankrupt.

15/ By the early 2000s, the Japanese stock market had lost 80% of its value, and land value in major urban areas had plummeted as much as 84%.

The recession was used by officials as evidence that Japan's old export-led system didn't work and that dramatic reform was needed.

16/ The film argues that BOJ policymakers (unaccountable, unelected, and operating at the whim of a greater US/IMF agenda) intentionally created the Japanese asset bubble, causing a decade-long recession, so that the country would have no choice but to accept structural reform.

17/ Famously, interest rates were lowered close to zero. But this didn't stimulate growth.

The film argues this was because even though the govt bought billions in assets and injected huge sums into the economy, they were simultaneously selling bonds, taking the money back out.

18/ By 2011, Japan had the highest debt-to-GDP ratio in the world.

Bank bailouts -- which were permitted in Japan post-WWII and Europe and the United States after more recent crises -- were not permitted in Japan post-1990.

19/ The result of the "lost decade" was political transformation, ending Liberal rule; moving economic decision-making from central bankers to politicians; and opening up the Japanese economy to the outside world.

Japanese leaders promised "no growth without structural reform"

20/ Power was moved from the banking sector to the stock market sector, as banks were handicapped and stock ownership was incentivized.

When banks would go under, the film argues that they could be picked apart and acquired by US vulture funds.

21/ The ultimate goal was to shift Japan from welfare to shareholder capitalism and from a manufacturing to a service economy, following in America's footsteps.

The film argues this could never be sold to the Japanese public without a massive recession, created by the deep state

22/ The film also looks at how the US and IMF took a similar line of action towards the "Asian Tiger" countries of Indonesia, Thailand, and South Korea during the 1997 financial crisis, where the rupiah, baht, and won crashed massively in value.

23/ To "rescue" these countries, the IMF was called in, which demanded increased domestic interest rates and curbs on internal lending, opening up national economies to Western actors.

24/ Banks in Thailand, Indonesia, and South Korea were encouraged to borrow from abroad, from US institutions in dollars, rather than to create credit at home.

A system was designed, argues the film, where it was more expensive to do domestic rather than international borrowing.

25/ Bailouts were not allowed in Asia, but they were allowed in America.

That same year, Long Term Capital Management had leveraged $5B in equity by borrowing 25x, more than $125B.

When its losses threatened the US system, the Fed organized a bailout.

26/ The film continues with a look at the European debt crisis, and compares the US and IMF agenda in Asia with the ECB agenda against individual EU member states.

27/ For example, loans were expanded in the early 2000s at a much faster rate in Ireland, Spain, Portugal, and Greece than in Germany.

These countries were left in shambles after the Great Financial Crisis.

They survived by surrendering fiscal and budgeting power to the ECB.

28/ The Fed, IMF, ECB, and BOJ are all enormously influential central banks which are largely undemocratic and unaccountable.

And yet, they have the power to change countries and to change the world.

And they are aligned in many ways.

29/ The film concludes by comparing the 1920s stock market bubble and crash in America -- where citizens were convinced during the Great Depression that a decentralized system could not work and that centralization was needed -- with the 1980s asset bubble and crash in Japan.

30/ Through the crash and recession in the 1990s, the Bank of Japan leaders (or "Princes of Yen") were able to convince the public that the old way of doing things wasn't good enough, and that reform was needed.

In order to do this, they needed to create a crisis.

31/ In sum I'd highly recommend the film, which is based on Richard Werner (@scientificecon)'s book by the same name. It's 90 min and available for free on YouTube.

As we look to a future where the Fed, ECB, and BOJ are considering CBDCs, the film's thesis is worth pondering.

32/ As we go into a more digital financial future, and as cash disappears, will central banks act in the interest of the people, and fight for our freedoms, savings, and privacy?

Or will the fight for special interests and the elite?

Global history shows a very clear answer.

33/ Central banking--while pitched as a critical element of a modern country--has staggering downsides.

There are those of us that believe in a brighter future where central banks and their monetary shenanigans could get replaced by a Bitcoin Standard.

Only time will tell.

34/ If the film’s core thesis — that the US pushed the BOJ to create the bubble — seems conspiratorial to you, see part 2 of this documentary by NHK (Japan’s BBC) — based on dozens of interviews with policymakers, who say the same exact thing:

amazon.com/A-Portrait-Of-…