"Japan is no Zimbabwe. Neither was Israel, yet from 1972 to 1987 its inflation averaged nearly 85%. As its CPI rose nearly 10,000 times, its stock market rose by a factor of 6,500 … Regular readers know that I don’t generally make forecasts, but that every now and then I do go out on a limb. This is one of those occasions. Mapping Israel’s experience onto Japan would take the Nikkei from its current 9,600 [as of October 2010] to 63,000,000. This is our 15-year price target." - Dylan Grice
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.
Game changer? It appears there is a mutiny afoot in Europe as Reuters and Bloomberg report that a number (rumored to be between 7 and 10) central bankers are set to challenge ECB head mario Draghi's leadership style and question his decisions on quantitative easing. As Reuters reports, bankers faulted his secretiveness and communication style making it hard for ECB to take bolder steps. Stocks are not happy and peripheral bond risk is cracking higher.
"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 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.
Money-printing turns out to be the grift that keeps on giving. The US stock markets retraced all their October jitter lines, and bonds plumped up nicely in anticipation of hot so-called “money” wending its digital way from other lands to American banks. Euroland, too, accepted some gift inflation as its currency weakened. The world seems to have forgotten for a long moment that all this was rather the opposite of what America’s central bank has been purported to seek lo these several years of QE heroics — namely, a little domestic inflation of its own to simulate if not stimulate the holy grail of economic growth. Of course all that has gotten is the Potemkin stock market, a fragile, one-dimensional edifice concealing the post-industrial slum that the on-the-ground economy has become behind it.
"Perhaps sooner rather than later, investors must recognize that modern day inflation, while a necessary condition for survival, is not a sufficient condition for increasing wealth at a rate necessary to satisfy future liabilities associated with education, health care, and a satisfactory retirement. The real economy needs money printing, yes, but money spending more so, and that must come from the fiscal side – from the dreaded government side – where deficits are anathema and balanced budgets are increasingly in vogue. Until then, deflation remains a growing possibility – not the kind that creates prosperity but the kind that’s the trouble for prosperity."
When a central bank buys an asset directly (often government bonds), it drives up the price of this asset, the demand for which increases. But the prices of the other asset classes increase only if the economic agents that have sold the first assets to the central bank use the money received to buy these other asset classes. This transmission of increases in asset prices to all asset classes is therefore unstable, since it depends on the behaviour of investors and savers. There is therefore no stable monetary policy "risk channel"; the only asset prices that are controlled by central banks in the longer run are those of the assets that central banks buy directly... hence Japan has now resorted to buying Japanese stocks directly.
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.
The Federal Reserve is saying one thing, but is actually doing the complete opposite...
"Do we really need QE every time the market gets nervous? Right now the world is a very vulnerable place... we are in the midst of a big bubble that will - down the line - be referred to as 'The QE Bubble'"
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.
Marty Fridson, CIO at Lehmann Livian Fridson Advisors, has been a leading figure in the high-yield bond market since it was known as the "junk bond" market — and he sees as much as $1.6 trillion in high-yield defaults coming in a surge he expects to begin soon... “And this is not based on an apocalyptic forecast,” he warns.
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 ...