Richard Koo's Latest: "Europe And US Have Learned Nothing From Japan's Lessons And Will Repeat Its Mistakes"

Tyler Durden's picture

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Spitzer's picture

Richard Koo is a very sick person

Just the opposite will happen of course. The ECB is holding the Fed/IMF hostage for bailout money while pushing the mtm value of their gold up. The dollar will hyperdevalue allot faster then the Euro.

The elite are moving to gold via the Eurosystem

King Euro

jus_lite_reading's picture

Richard Koo is a very sick person


May you eat these words.

theXman's picture

Mr Koo forgot that, before the war stimulus sent US economy into overdrive, much of the rest of the western economy had been destroyed. In a way it was a gargantuan austerity program imposed by the Axis power onto the world for several years. Plus US was under 10 years of hardship herself. Without those conditions, the stimulus would not have had the same effect.

Back then US was the factory to the world, and our oil supplied our allies. Today we shipped the bulk of manufacturing base to China and buy most of our oil consumption from foreign country. There is no way to stimulate US economy the way it is now.

Vampyroteuthis infernalis's picture

Spitzer, I am calling you out this time. Europe is dead. They produce nothing and consume quite a bit. Their debt level is way above the US'. Their problems are much worst than the US (as f*ck&d up as the US is).

RIP Euro

Spitzer's picture

Europe is a net creditor.Germany has trade surpluses with China.

Europe is not more fucked up then the US.

traderjoe's picture

I wonder how the differences in the natural resource base will impact economic performance in the next phase? Were the PTB at least smart enough to allow North American resources to be 'largely' untapped while depleting ME reserves?

jus_lite_reading's picture

If a gov't could buy up it's own bonds, then why haven't they done this all along? Game over folks. We're entering a full blown emergency. I'd venture to say, we see a major false flag in the coming weeks, if not days.

RobotTrader's picture

Right now, I think the guys over in Euroland are starting to get excited about the S & P 500.

Especially since their bond markets are underperforming.

It's breaking out in Euros and Pounds:

Spitzer's picture

because the S&P 500 is a safer bet then US debt.

buzzsaw99's picture

Koo Koo Ka Choo


Stimulate me bitchez!

jus_lite_reading's picture

As with anything, never trust anyone. There are always secret motives. All the people screaming "buy a house now!" are probably involved in the housing industry one way or another -or- they are looking to sell their home.

The facts remain, the citizens of this once great country are brainwashed into thinking this is just a recession when in fact, its worse and also, the taxpayers of the WORLD, (yes Ireland, Greece et al you too) have been robbed blind and there is nothing they can do...

Strider52's picture

I have a friend who is a Real Estate agent. About 5 years ago, she bought an apartment that was now called a 'condo', for about 400K, way the F too much money. It started to go up in price, so she bought a $6,000 fireplace to go with it. Then the market crashed. She couldn't sell a house to save her life, went broke, and got foreclosed on. Nowadays, she's still broke, not selling any houses, and had to move in with her boyfriend. Sheesh, would you buy a house from an agent that LOST a property, and still owes the bank over 250K?

RobotTrader's picture

Kind of figured we would rally today.

The "Fast Money" guys said last night that we were going to crash.

And their celebrity "guest" on the show was also very bearish:


Dan "The Greaseman" Niles is bearish
- Wed, Dec 15, 2010 - 11:17 PM

Watching "Fast Money" tonight...

Everyone on that show is scared to death.

Dan "The Greaseman", famous for his "AMAT train is leaving the
station" calls in 1998 - 2001 which usually incited insane meltups in
chip equipment stocks,

Well, he says he's shorting European banks, and is buying puts hand
over fist to protect his few tech stocks to, and I quote:

"keep my portfolio from getting destroyed"


He's heavy short on names like STD, HBC, BBVA....

toathis's picture

thank you for your posts. You are easily the most influential commentator on this wonderful site. (the double-talk is out of control...that QE explained video is a great example... the dude that authored it is a hxc BULL!)

Sure is nice getting some help SLAMMING these dead stinking wrong doomers that have been wrong about everything since the previous recession ended last spring

Gold is about to massively plunge as the Grand Global PM bubble bursts all over the place.

Cash is heavenly! 10-year looking beautiful. Much better investment than Gold.

Yields, ftw!

Spitzer's picture

No inflationist "doomers" have been bearish on stocks dumb ass.

Its only guys like Denninger, Prechter and Mish that are bearish on stocks.

Why would a 10 year bull market in gold be the bubble and a 30 year bull market in bonds not ?

can you answer that simple question ?

Panafrican Funktron Robot's picture

An even more fun riddle: If bonds tank, and stocks are largely supported by bonds, what happens to stocks?

Fed is the primarily holder of the important stuff, but there's still a whole bunch that gets traded outside their sphere.

Not really refuting anything your saying, just curious as to your opinion on this interplay. 

Spitzer's picture

Eventually stocks will go down because higher interest rates will compress margins.It depends on the sector though, and the country. Foreign stocks will not fall nearly as much as say, US retail.

toathis's picture

because the US bond market is the most liquid in the entire world no one else comes close!

Gold is a speculative investment vechicle just like anything else.

90% of transactions are done via credit/debit card. Thus, Hyper-Inflation is impossible. Unless you are paying with phsyical currency, the physiological "trigger" is abscent to cause skyrocketing prices

Panafrican Funktron Robot's picture

Just because something is liquid, doesn't mean it isn't cyclical.

"Gold is a speculative investment vechicle just like anything else."

Like bonds, for example.

"Unless you are paying with phsyical currency, the physiological "trigger" is abscent to cause skyrocketing prices."

I agree that hyper-inflation is highly, highly unlikely, but substantial price increases in commodities pretty much across the board is going to mean either substantial margin compression (already happening) and/or increasing prices of goods (already happening in some products).  Margin compression is generally equities negative, and in the absence of a corresponding increase in nominal household income, increasing prices of goods won't increase total profit (supply/demand), and EPS misses or reduced EPS guidance are both equities negative.


Imminent Crucible's picture

"the US bond market is the most liquid in the entire world"

--I wonder if you realize how much of the liquidity is Fed-supplied.

"Gold is a speculative investment vechicle just like anything else"

Not quite.  Most other speculative investments are not listed on the periodic table of investments or suitable as foreign currency reserves, and most other speculative investments involve counterparty risk.

The idea that hyperinflation is impossible because people use credit or debit cards is hilariously naive.  If you can't spell "vehicle", "physical", or "absent" properly, and you confuse "physiological" with "psychological", why should anyone take you seriously?

A hyperinflation is not caused by a central bank that lets monetary inflation get out of hand during a boom.  A hyperinflation is caused by a central bank that feeds money stock growth into a bust cycle, resulting in a collapse of confidence in the ability of the currency to act as a store of value, even in the short term.

Hyperinflation is not only possible, it is the most likely result if the Fed continues to boost unsterilized money creation through Treasury monetization while the economy--the stock of goods and services--is not growing.

It is not about to happen, but when it does, it will appear (like most historical hyperinflations) with terrifying suddenness.

Vampyroteuthis infernalis's picture

Interesting way to see it. It is like the squid's recommendations. Do the opposite.

-The world is a vampire....

MakeMineADouble's picture

Off Topic


Banks Push Fed to Curb Borrowers' Right to Rescind Mortgages


anony's picture

Why, when you see a country like the U.S. do something that has already proven suspect, i.e. the Japanese economic 'solution'---- think that it is a "Mistake"?

Can it not be instead that this is the solution they know--- with fairly accurate precision ---and will therefore enrich the same few people who made trillions off of it when Japan did it?

In other words, they are betting on sure-fire thing.  


suteibu's picture

Koo...what an idiot.  Hell, Japan has learned nothing from its past.  Oh, that's right...its a balance sheet recession.  Well, there you go.


RobotTrader's picture

RIMM bouncing all over the place after hours....

ORCL flying after hours.....

I guess Ellison is going to build an even bigger yacht.

Spitzer's picture

I was the one arguing with Reggie Middleton about RIMM all year, not you. I have my 30%, going to buy Almos Gold stock.

Panafrican Funktron Robot's picture

Nomura is a primary dealer, so they have a vested interest in boosting the issuance of UST's.  Notice how he never bothered to state what the better uses of that money would be.

"They are oblivious to the fact that austerity is a fundamental policy mistake
during a balance sheet recession."

I think Koo is actually right here (to a degree), I just disagree with the implied prescription, ie., the continuance of the status quo stimulus functions (furthermore, debt-based stimulus is inherently unsustainable; stimulus resulting from having actual reserves is a good way to moderate volatility).  Always fun when the banksters use good ideas as a cloak for their evil machinations.  Just wait til they start bastardizing Austrian school ideas.  At that point, hopefully we'll all realize that they're going to steal your cake regardless of how you decide to produce and/or slice it. 

ViewfromUndertheBridge's picture

"They are oblivious to the fact that austerity is a fundamental policy mistake
during a balance sheet recession"....this is the key phrase, same in his book, which he modestly sub-titles "The Holy Grail of Macroeconomics".

In my opinion he misses the fundamental moral driver of austerity....stimulus, after the immediate emergency, is revealed to reward the bad actors and entrenched interests.  Absent traditional austerity and accountability you do not get price discovery and therefore most investors will not participate.

Austerity must be coupled with legal recourse over the previous excesses, it is inevitable...if you want to restore trust and willing effort from all segments of society to rebuild...but, this time is different because austerity and accountability cannot be applied to banks without bringing down the system as the banks and now many sovereigns are insolvent if marked to market.

So, stimulus and deception are the order of the day until something turns up. Richard Koo and his ilk are oblivious to the fact that a majority of people think this is a very bad way to run a world.

mkkby's picture

What these economists somehow don't notice is that budget deficits are another form of stimulus.  We've had massive stimulus of this type since the early 80's -- almost 30 years.  This has created 10's of millions of artificial jobs and at least 20% GDP that wouldn't exist if gov didn't borrow/print money.

Look at Greece if you want to see what happens when a society gets addicted to socialist free handouts until the well runs dry.  Massive cuts in jobs and business.  And you have rioting by the whining losers who thought a free lunch lasted forever.

toathis's picture

ummm. socialism is not the problem rather it is the solution! Much preferable to fascism.

The United States has the most fascist health dilvery system on the planet!

Panafrican Funktron Robot's picture

The only real takeaway from the engineered Greek "crisis" is that the relevant powers are capable of fucking with (and profiting from) pretty much anything with abandon. 

bank guy in Brussels's picture

Kudos to ZH for giving a forum to Richard Koo of Nomura and his nicely-elaborated 'Party On!' approach.

Fabulous his theory, that in a 'balance sheet recession', strong continued borrow-and-spend may bring 4x or 5x in growth multiples. And his theory that deficits don't necessarily matter when the private sector is deveraging for a few decades.

Like his idea for a 'Plan B' to implement the Richard Koo approach. Here in Europe we could maybe have some countries do austerity, while others do the 'Borrow and Spend and Party On!' plan, and we'll see how they compare after a while. Would like Belgium to be a 'Party On!' country under Koo's supervision.

sethstorm's picture

While not likely, a repudiation of Third World debt by the US, Canada, Japan, and EU (and other debt-laden sovereign entities) would solve that problem.

The problem would be that it'd start more than a few riots in places normally held down by the government.