The scale of Japan's economic stimulus is truly staggering, whichever way you look at it. The plan is to spend US$70 billion per month buying Japanese bonds, or more than one Cyprus bailout per week. Over time, the total estimated spend is put at US$1.5 trillion.
Now, as far as the currency wars go, that is a pretty big offensive. The official target is to get Japanese inflation up to an unremarkable two per cent, but the practical effect has been to cause a sharp depreciation of the value of the yen against the dollar.
In its own way, it will also reduce the attractiveness of holding Yen-denominated debt, which could well prove to be a major issue for an economy which owes a staggering 240 per cent of GDP.
But the dollar itself is also the subject of a money-printing exercise of epic proportions, as is the pound. The Euro alone is immune, but its' very viability is threatened at other levels.
Where does the smart money go then? Normally, it goes into commodities. But right at the minute there are complicated cross-winds at play. Gold is falling, on the premise that the global economic recovery is underway. However, other commodities are falling too, on the premise that the recovery isn't happening fast enough.
And that all has a knock-on effect to mining equities. The pain in the gold space is particularly acute - Our Man in Oz notes in his Australian market roundup this week that gold is now officially in a bear market.
Conspiracy theorists like Jim Sinclair speak of a central bank-orchestrated "takedown". But the reality is surely more prosaic. At a time when the Dow and the FTSE are nudging all-time highs, capital is being cycled out of commodities and mining to where the returns are better.
There are two ways for junior miners to respond to this. One is to point out that with competitive devaluation accelerating around the world, commodity prices will inevitably rise in dollar terms, and quite sharply too, once the effects are felt.
The other is for the miners to start making the returns they offer themselves far more attractive. Hence, Caledonia Mining and Pan African, two companies we have written about recently on Minesite, have both recently re-iterated their commitment to dividend payments. More and more companies will follow suit.
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