Bank of Japan
We’ve been keeping the long lost idea of our long lost society alive by squeezing our own children wherever we can, and telling them that if they only work hard enough, they can be whoever they want to be. But they can’t, that notion is also long lost. When you keep home prices artificially high, homeowners don’t suffer as much, even if they bought at insanely high prices, but the suffering is switched to potential buyers, who remain just that, potential, while they live in their mom’s basements for years. A surefire way to kill a society while everyone’s eagerly awaiting the growth that is just around the corner and will forever remain there. Take it from your kids. Take it from somewhere else in the world. And that’s where we’re now passing a barrier: there’s no-one to take it from anymore.
"In announcing that it will boost purchases of government bonds to a record annual pace of $709 billion, the central bank has just added further fuel to the most obvious bond bubble in modern history -- and helped create a fresh one on stocks. Once the laws of finance, and gravity, reassert themselves, Japan's debt market could crash in ways that make the 2008 collapse of Lehman Brothers look like a warm-up. Worse, because Japan's interest-rate environment is so warped, investors won't have the usual warning signs of market distress. Even before Friday's bond-buying move, Japan had lost its last honest tool of price discovery. When a nation that needs 16 digits in yen terms to express its national debt (it reached 1,000,000,000,000,000 yen in August 2013) sees benchmark yields falling, you've entered the financial Twilight Zone. Good luck fairly pricing corporate, asset-backed or mortgage-backed securities."
"I was on a panel with Alan Greenspan a week ago... I said, you mean to say that the Federal Reserve is not independent? He immediately said, Marc, I never said the Fed was independent. In other words, the Fed and the Treasury and the government is basically one and the same."
"Japan is engaged in a Ponzi scheme"
"The oil price decline is not necessarily very good for the US - if oil prices went lower, it may actually have an adverse impact on the US economy"
The problem with what we call the Exit Rule for Bubbles - "you only get out if you panic before everyone else does" – is that you also have to decide whether to look like an idiot before the crash or an idiot after it.
The Bank of Japan's surprise expansion of financial stimulus strikes me as the monetary equivalent of Pearl Harbor --not in the sense of launching a pre-emptive war (though the move does raise the odds of a global currency war), but in the sense of a leadership pursuing a Grand Strategy to the point of self-destruction because they have no alternative within their intellectual and political framework. Trying to "fix" a sclerotic, inefficient state-cartel economy by boosting inflation--the ultimate goal of Japan's Monetary Pearl Harbor-- is a self-liquidating path to destruction.
In simple terms… we’re back in 2007, but the Fed will have very real limitations to what it can do when this bubble pops. And it will pop in the not so distant future.
Two weeks ago, this happened to the world's allegedly most liquid On The Run bond on no news, which subsequently sent the entire market plunging before James Bullard was forced to hint at QE4 and send the market into a short-selling spasm that has since seen it hit record highs. Now, the "stability" of the world's (formerly) most liquid market has shifted to what used to be the most liquid FX pair, the EURUSD, which moments ago, on no new whatsoever - again - imploded, plunging to the weakest level since August 2012.
In less than the time it takes for a chrysalis to release one of life’s remarkable transformations, many once called “capitalists” woke to find the world they once new changed into something only dreamed or told in folklore. In this new fairytale land there must certainly be a pot of gold at the end of every “rainbow.” However, one would be mistaken. For one must remember this is a “Keynesian Shangri-la” and gold here is useless. Today, at the end of these self propagated rainbows lies a Central Bank ready and willing to print as much money as one needs to see those vivid colors so plainly; only the term Technicolor® seems appropriate as a descriptor. “Markets right themselves with pain… That’s Capitalism. Back room manipulation to avoid pain only increases the severity of the pain to be felt down the road.”
When Calpers buys an international asset for its investors, is it intervening in the forex market on behalf of the US?
Japan’s aging population needs rising prices like a hole in the head. The more “successful” Mr. Kuroda becomes in forcing prices up, the less money people will have to spend and invest. The economy will weaken, not strengthen, as a result. The advantages the export sector currently enjoys are paid for by the entire rest of the economy. moreover, even this advantage is fleeting. It only exists as long as domestic prices have not yet fully adjusted to the fall in the currency’s value. If one could indeed debase oneself to prosperity, it would long ago have been demonstrated by someone. While money supply growth in Japan has remained tame so far, the “something for nothing” trick implied by the BoJ’s massive debt monetization scheme is destined to end in a catastrophe unless it is stopped in time. Once confidence actually falters, it will be too late.
This is only going to usher in the next round of the Great Crisis that much faster. Only this time around, entire countries will go bust, NOT just banks.
"The decline in asset yields especially during QE3 created large wealth effects. Since the Fed's QE started at the end of 2008 the PE multiple of the S&P500 index (12-month forward) went up by five points, from 10.5 at the end of 2008 to 15.5 currently. This PE multiple expansion is responsible for around 650 index points or 32% of the current S&P500 index level. Extending that to the total stock of US corporate equities ($29tr currently), it implies an equity wealth boost of $9tr."
“Kuroda loves a surprise - Kuroda doesn’t care about common sense, all he cares about is meeting the price target,” Folks, look-out below. As George W. Bush said in another context... this sucker is going down!
Bankruptcies in Japan more than doubled in the first nine months of 2014 compared with the same period a year ago. Japan has embarked on a radical monetary experiment to spur inflation. But it may backfire and lead to stagflation and in a worst case scenario a German ‘Weimar’ style hyperinflation ...
From a market perspective the move today was almost perfectly timed coming on the heels of a Federal Open Market Committee meeting which ended quantitative easing and expose the big difference on future monetary paths between the BoJ and the Fed. There is, however, a dark side to this big move.. telling a story of how central banks, even the desperate ones like BoJ, are and remain one-trick-pony institutions: "this is the final round – Japan was ALWAYS going to give it one more shot – now it happened."