Is Charlie Munger Becoming Austrian: "It Was Massively Stupid For Our Government To Print So Much Money "Submitted by Tyler Durden on 05/02/2016 13:19 -0400
Any moment now we expect Paul Krugman to come out with an op-ed suggesting that not just Time magazine, but Charlie Munger is the latest to join ZH payroll following what were some surprising comments by Warren Buffett's right hand man earlier today on CNBC when he said that "the U.S. is looking more like Japan given the prolonged low-interest-rate environment." The one phrase which Krugman will surely have something to say about was the following: "I strongly suspect it was massively stupid for our government to rely so heavily on printing money and so lightly on fiscal stimulus and infrastructure," Munger told CNBC's "Squawk Box."
In light of what has taken place right before, during, and since The Fed's "emergency meetings" and Obama's chit-chat with Yellen; along with what has recently been released for public consumption (and especially by other governments and officials) capped off with the sudden declaration via Treasury of "currency manipulation warnings" - Is it really that much of a stretch to think that just one wrong move whether intentional or not – can set everything we’ve come to know as “business” into complete and utter disarray? If not worse? As in much worse?
In the wake of the Bank of Japan (BoJ) decision to stand pat, Japan looks to be in ever more desperate straits, given the growing danger of sliding into its second recession since Abenomics was introduced. Such a recession would be the nail in the coffin of Abenomics, launched with high hopes and much fanfare three years ago. It made sense, therefore, for Prime Minister Shinzo Abe to seek the advice of Paul Krugman, who has been one of the chief cheerleaders for Abenomics, in a private meeting last month meant to lay the groundwork for the G7 Summit at Ise-Shima next month.
Japan has proven that decay can be stretched into decades, but it has yet to prove that gravity can be revoked by central bank monetary games.
The latest shocking example of just how intertwined central banks have become in all capital markets, comes courtesy of the Bank of Japan which days ahead of a move which may see it double its ETF purchases from the current run rate of JPY3.3 trillion to JPY7 trillion or more (if Goldman is correct), is revealed to be a top 10 holder in about 90% of all Japanese stocks. Crazier still, if as Goldman predicts the BOJ doubles its purchases of ETFs, the central bank could become the No. 1 shareholder in about 40 of the Nikkei 225’s companies by the end of 2017,
Krugman is wrong. An economic boom, based on nothing but hot air (phony credit, with no real resources behind it), is fraudulent. It will never take us to real growth. Just the contrary. The best thing to do is to pop the bubble…and then pick up the pieces. Besides, it will pop whether we want it to or not. Heck, we believe in magic as much as the next guy. But the magic act is wearing a little thin. The smoke is dispersing. The rabbits have disappeared. All the glam and sparkle, the shock and awe, the claptrap and hokum – they’re all giving way to economic reality. We are beginning to see more clearly: the Fed’s theory is nothing but hot air.
Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”
So far this year, Janet Yellen has not taken a single step in the direction of a “normal” monetary policy; our guess is that she never will. Why not? Is it because she is a witless tool of Deep State cronies? Is it because her economic theory is silly, superficial, and simpleminded? Or is it because she and her predecessor, Ben Bernanke, have done so much damage to the normal world that there is nothing to go back to?
"A similar [deflationary mindset] had occurred in the US in the 1930s. What solved the question? War! Because World War II had occurred during the 1940s and that became the solution for the United States. [We] have to switch [the Japanese] mindset... we are looking for the trigger."
- Japan Fin Min Taro Aso
“About two years ago, I had a pleasure meeting with you, Professor Krugman. We were talking during that time that a rocket has to go out of the atmospheric region, which means that an escape velocity has to be earned in order to lift the Japanese economy out of deflation and we were looking for a good speed to do that. We worry about the accumulated debt. That is a source of another concern. What to do about it?”
A government that believes it can run our lives, run the economy, and run the world will inevitably come to believe it can, and should, have the power to silence its critics. Eliminating the welfare-warfare state is the key to protecting our free speech, and other liberties, from an authoritarian government.
“I thought the Depression was going to go on forever. For six or seven years, it didn’t look as though things were getting better. The people in Washington DC said they were, but ask the man on the road? He was hungry and his clothes were ragged and he didn’t have a job. He didn’t think things were picking up.”
In the Middle Ages, no matter what ailed you, the doctor had one cure: attaching leeches to your body. Today, modern medicine has discredited leeches as a cure-all. We look back on it and laugh. “How could we have been so stupid?" Some things haven’t changed much. The average person is still willing to blindly accept conventional thinking—maybe even more so than he was in the past. Today, he hears the financial equivalent of “more leeches!” and agrees. Conventional wisdom and economic “experts” continually prescribe treatments that we will no doubt look back on and say, “How could we have been so stupid?”
They came, they saw, they released a vacuous statement littered with empty promises. Now what?
Have we reached the Keynesian end game? One central banker thinks so. "We have reached a point where monetary policy no longer has a big overall impact,. [It's] overstreched [and] there’s a limit to what more one can do’."