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After Abenomics Failed In Japan, It Is About To Be Tried In Europe
After two years of Abenomics, Japan officially admitted it has entered a triple-dip recession. While people with a modicum of common sense warned this would happen long ago, it actually came as a surprise to traditionally trained economists: after all, a country whose economy collapsed under piecemeal episodes of "Abenomics" over the past three decades was supposed to, if only for those trained in the Keynesian school, promptly recover (even though its fundamental problem is not economic but demographic) when that which had failed for so long was applied in one shock episode.
It didn't work.
So now that Abenomics has officially failed in Japan (but will remain in place until Abe is ouster, either voluntarily as the local population has had enough of Japan's record inflation imports) what comes next? It is about to be tried in Europe of course, that other place where 5 years of unconventional monetary policy has masked the complete fiscal collapse and lack of reform of its member states, and as a result, nothing has improved except for a transitory bounce in stock prices, which recently hit record highs benefiting the 1% if only for a short period, with the hangover now is settling in and Germany's DAX back to a 1 year low.
Here is the WSJ's take on the double down "shift" taking place in Europe:
Some commentators, such as New York University’s Nouriel Roubini, have likened Mr. Draghi’s plan to Japan’s Abenomics—named for Japanese Prime Minister Shinzo Abe. This 2012 plan to spark inflation and drag Japan out of a long economic malaise had three “arrows”: a big monetary stimulus, fiscal “flexibility” and supply-side reforms.
Some officials in Brussels say there is a bargain along these lines being developed that will take shape after a new European Commission executive takes office in November.
It would combine four elements: a deeper commitment to supply-side reforms from France and Italy, the eurozone’s current problem children; more public investment from Germany, both at home and in Europe; and a public-investment plan whose outline has been described by commission president-elect Jean-Claude Juncker.
According to these officials, the more governments deliver on this deal, the further Mr. Draghi will be willing to go to support the economy by expanding the ECB’s balance sheet.
One can hardly wait for Draghi to intone in his Italian accent: "the three arrows will hit their target, whatever it takes." B
But there is a problem: Abenomics has failed in Japan.
Yet, if there is one thing that unites past initiatives to spur European growth it is that they have all underwhelmed. Is there any reason to think a version of Abenomics can work here?
Russell Jones of Llewellyn Consulting, a London-based consultancy, said there are indeed some parallels between Mr. Draghi’s outlined plan and Abenomics. “The problem is that Abenomics isn’t working very well,” he said.
While there has been some evidence of fiscal flexibility in Japan, there has been little progress in promised structural reform, he said.
There is another problem: "The Bank of Japan is taking on roughly $2 billion every working day in new assets to keep the plan afloat." As is well-known by now, in Europe there is an epic scarcity of unencumbered assets, something covered here back in 2012.
It is the inability of the ECB to freely inject reserves into the system in exchange for purchasing some asset, that has been the biggest stumbling block for the ECB ever since Mario came to power, and why Europe's primary and largely only form of intervention to date has been a verbal one.
Still, despite the structural limitations of a European QE, it may still be tried regardless:
The eurozone program would start, by contrast, after a period of contraction in the ECB’s balance sheet since 2012—suggesting monetary policy may have constrained growth in the last two years. Economists like Mr. Jones predict that the ECB will have difficulty expanding its balance sheet even to the levels that prevailed in 2012.
On fiscal policy, most budget cuts have already been made. But there isn’t that much scope for more fiscal flexibility in the eurozone. Many senior officials in the Brussels-based commission, along with quite a few eurozone governments, are unsympathetic to French and Italian requests to further relax budget rules.
Many observers are skeptical that any German boost to public investment will amount to much, while most of the Juncker plan remains unelaborated.
Officials say they are exploring a number of innovations to galvanize EU investment, including using more guarantees in the EU’s own budget, increasing the capital governments pay in to the European Investment Bank and even using the eurozone bailout fund, the European Stability Mechanism.
The latter is a long shot. But even if all of these ideas come together and overcome inevitable political opposition, it would be lucky to reach the more than €300 billion ($380 billion), to be invested over several years, that’s being talked of.
Abenomics, European-style, thus faces different obstacles to its Japanese counterpart.
Of course, the most important issue that is not being discussed by the WSJ, or economists anywhere for that matter, is that Abenomics, whether in Japan or Europe, is merely applying more of the same policies that resulted in a worldwide financial crisis in the first palce.
What should happen, is what we have advocated from the start: a fresh start liquidation of the massive debt overhang. That, however, will not happen in the current system as a global debt restructuring would also wipe out the equity tranche, those trillions of the legacy "uber-wealth" class.
Which means there are just two options for the world's (central) bankers: hyperinflation, i.e. helicopter money, and war. Both are getting closer with every passing day.
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What business model. Explode everything.
What's the difference between money printing and 'Abenomics'? All the same shit and everyone has been doing it all-out for years now.
Doctors of Economics doing childish origami. But folding fiat does not increase its value !
They should teach the doctors about the monetary triangle: Unit of Account (U), Store of Wealth (W), medium of exchange (M).
http://foolishperspective.blogspot.com/2012_01_01_archive.html
Get physical (backed) currency.
If at first you succeed..buy buy again
Yeah apparently art cashin knows more about the german economy than germans do.
Just because the US wanted to trash itsself with QE doesnt make it right for others.
Well if anything will drive the German's out of the Euro this will be it though they'll likely have to shitcan Merkel to do it.
There will NOT be abenomics in Europe
Japan is one solid country.
EU is one boiling soup with different ethnicities
NOT GONNA HAPPEN
There is no common debt. I simply dont see how this would be done in the EU.
Rather, EU will go belly up first. What happens after that is the question.
Just maybe that it is all not so innocent ignorance and hubris that they knowingly follow such failed policies...
... but for a more sinister reason to steal from the plebs and force them into servitude, poverty and debt on purpose.
... while paying the media and analysts to keep making up strawmen arguments, false dichotomy and goalseeked analysis to keep the sheeple confused and distracted?
I mean... just maybe...
Balkanization, and re-arrangment of sugar daddy's and children countries.
Exacctly! BUT some countries will suffer more than the others. If Germany enters into "abenomics" mode then EU is fcuked indeed..
One thing that would completely floor me in all this is Germany announcing they're onboard the money printing express....in fact, I recall reading just last week how Germany said that is 1 option that's right off the table due to the history involved? This is all just jawboning.
Yep. Europe prefers war.
But they prefer it someplace else.....
Draghi:
"We can't let failure and common sense get in the way of robbing the public treasury!"
Boy Corn sure flatlined on the Marketwatch futures! They are giving the shit away!
I like the idea of mailing me money.
"I like the idea of mailing me money."
that would be considered a "helicopter drop"
but what EVERYONE fails to realize - that "drop" comes from legislatures ... not central banks.
Central Banks have no mechanism to "helicopter drop"
Forget the funny money. Just send me gold bars.
send me a side of beef
a deeper commitment to supply-side reforms from France and Italy, the eurozone’s current problem children;
haha
there will be no reforms ... just promises
get germany on board to "print" NOW ... then back out of promises later ... cat out of the bag
Dont know about that. But I would say that Germany is walking on a razor's edge. If something big is going to happen, Germany will be at the epicenter.
yep, Germany KEY to everything
i assume they have run simulations on worst case what happens with euro breakup or "print"
imo, either way Germany screwed big time ... just have to decide which brings less pain
I think the pesky Germans have already made their decision. Remember this one:
http://www.zerohedge.com/contributed/germany-already-printing-money%E2%80%A6-deutsche-marks
The need an "out." Engineered if necessary.
more importing of DEFLATION for US
lol. i went from steak to roast. then roast to hamburger. now i cant afford meat. deflation? lol
Next in line is TVP... https://en.wikipedia.org/wiki/Textured_vegetable_protein
The 'elites', actually asshats, are just trying to figure out some way to save their phony baloney power positions and keep their heads out of a noose.
Let's hope they fail as miserably here as everyplace else.
Hey Janet Yellen, William Dudley and Charles Evans,
You'll see Benanke's grand Keynesian printing experiment blow up in the Fed's face. Enjoy.
Failed? I don't think so. What it is actually intended to do, it does quite well.
Fcuk the EU!
Traditionally-trained economists?
Trained to be professional liars like "climate experts" and just about anybody of note on Capitol Hill or in the Obola administration.
Some commentators, such as New York University’s Nouriel Roubini, have likened Mr. Draghi’s plan to Japan’s Abenomics—named for Japanese Prime Minister Shinzo Abe. This 2012 plan to spark inflation and drag Japan out of a long economic malaise had three “arrows”: a big monetary stimulus, fiscal “flexibility” and supply-side reforms.
Some officials in Brussels say there is a bargain along these lines being developed that will take shape after a new European Commission executive takes office in November.
It would combine four elements: a deeper commitment to supply-side reforms from France and Italy, the eurozone’s current problem children; more public investment from Germany, both at home and in Europe; and a public-investment plan whose outline has been described by commission president-elect Jean-Claude Juncker.
According to these officials, the more governments deliver on this deal, the further Mr. Draghi will be willing to go to support the economy by expanding the ECB’s balance sheet.
I.E. Print 1T Euros as I stated yesterday on several threads
1 trillion euros? Pocket change to what's already flowed into the European banks from the Fed. Nothing's new or changed here at all.
'Money printing' under various different names, there's nothing new here at all. Most of our FED QE 'Abenomics' flowed right to European banks already...same old shit, different names.
This'll send gold to all time lows
According to Krugman, aliens need to attack Japan and that will solve the economic problems.
Oh wait ... that already happened too.
See, it solves numerous problems. We can get off of this planet - solving the perpetual growth versus finite resources problem. AND, we can get out there and piss off some aliens in order to have our perpetual war!
It's a win-win.
Shit, ZH has already done the math on building a Death Star. Outstanding economic benefits all around. AND, AND the White House has already been warmed up to the idea.
(leaving the /S off because this actually makes more sense than anything else "terrestrial" being considered).
Actually it does work. It will keep the fucklords in power until there next solution. Fucking parasites.
Godzilla was a Keynesian creation.
also, this song is badass
https://www.youtube.com/watch?v=T65rW_SIzg0
obviously the bofj will have to buy every stock going & then buy / sell to itself to "make the market" - same shit that's going on here
Nikkie stocks doubled under Abe's QE...does that mean Eurostoxx is up next?
"...and a public-investment plan..."
Publics money cofiscation they mean.
These people are nuts! In my day, whenever he ran into trouble, Mario would go get Yoshi and climb the bean-stock up to where all the gold is hiding. Isn't that a better plan than this farce?
debt liquidation is not going to happen, because PEOPLE COMMENTING ON ZEROHEDGE dont want (their) wealth reduced. read your own comments.
BoJ QE was too small, try bigger!
These policies are not designed to help the Japanese or Europeans.
They are designed to destroy their currencies and support the dollar.
Not to be an asshole or anything, but can we just fast forward all this.
Draghi tries and FAILS (as everyone in the world but Draghi knows will happen).....Then the people chase him down in the streets and leave him hanging by his balls in the middle of Belgium and then they post the pictures on FB.
I just don't think I have the stomach to wait out all this BS any more.
Abenomics has a greater mortality rate than Ebola
100% guaranteed
The IMF can bank on that
ECB President Mario Draghi's last move towards more QE is no more than stupidity on steroids, even words like misdirected and boneheaded do it a disservice. This is more proof that the Euro-zone is in big trouble, both the union and the flawed currency is again begging to crumble.
One is forced to wonder if Japan and the Yen will crash first considering how each day Japan slides closer to the economic abyss or whether the Euro will lead the way into the wastebasket. Draghi has helped the countries of Europe kick the can down the road but this only delays the failure on the Euro. More on how the Euro-zone has failed to make any real reforms in the article below.
http://brucewilds.blogspot.com/2014/09/euro-zone-and-draghi-both-mired-i...