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Albert Edwards On What Happens Next: "More QE - Everywhere!"
Overnight the Bank of Japan disappointed liquidity addicts everywhere when instead of boosting its QE by a modest JPY 10 trillion (why not: it already monetizes 100% of net issuance, what is another 15%, or 50%, or more?), it did nothing, sending the JPY briefly higher, until the GPIF came right along and proceed to sell a few yards, buy USD and then go ahead and buy more stocks.
But even more disappointing for liquidity addicts was that, as Goldman put it, the BOJ "unexpectedly, the BOJ significantly rolled back timeframe to achieve 2% inflation." This is what Goldman said:
For us, the biggest surprise in today’s Outlook Report was that the BOJ rolled back the timing for achieving 2% inflation to “around the first half of fiscal 2016” (ie, end of September 2016), from “in or around fiscal 2015”. We had expected the bank to hold off revising its target timing until the July interim assessment on the grounds that rolling back the timing just as the new fiscal year had begun was not desirable from the standpoint of potentially fostering expectations for inflation.
Governor Kuroda repeatedly mentioned that the underlying inflation trend is one of improvement, based on the oil price, which is tracing an upward path as envisaged by the bank since the January interim outlook, developments in output gap and inflation expectations, and observations on this year’s spring wage negotiations. Furthermore, Governor Kuroda reiterated that he has no intention to change the bank’s “commitment to achieve 2% inflation in 2 years time”. These messages are clearly inconsistent with today’s BOJ decision to roll back the timing of attaining 2% inflation. Our reading of the situation is that, due to a lack of confidence in inflation developments going forward, the BOJ has decided to buy itself additional time, at a relatively early stage, ahead of being pressed to do so by the market, even though it may impact its credibility.
As a result, Goldman concludes that "we plan to revisit our monetary policy outlook after closely examining March macro data that are starting to come out. However, we see a risk that the BOJ’s unexpected shift to a later timeframe for achieving 2% inflation may push back additional monetary easing from our baseline scenario of the July interim assessment."
In other words, bearish for buyers of Nikkei, and USDJPY, because without the BOJ's helping hand what else is there really?
Well, one person for whom the BOJ's "efforts" to destroy its currency should not be discounted, and whose further easing is not only inevitable but imminent, is SocGen's Albert Edwards.
This is what he wrote earlier today:
"one area though where Abenomics has undoubtedly failed is that the Bank of Japan has not achieved its 2% core inflation target. When the BoJ started QE in April 2013 they stated that they wanted to hit their 2% inflation target for core CPI at the ?earliest possible time, with a time horizon of about two years?. Well that is now! Yet most key measures of CPI inflation are set to crash to, or even below, zero in the months ahead as the estimated 2% effect of last year?s VAT hike is set to drop out of the yoy calculations. Core CPI inflation that the BoJ targets, which excludes just fresh food, has been running at 2% yoy in February (March data out this Friday). But I prefer to focus of the readily available CPI ex food and energy (known in Japan as core core CPI), which for some peculiar reason does not get followed that closely by the market. At the same time as the March national CPI is published, April?s CPI data for the Tokyo area also will be released. The headline and core (ex fresh food) CPI will be just above zero yoy. But the core core Tokyo CPI (ex food and energy) is likely to have dipped below zero as VAT drops out as the rate in March was already only running at 1.7% (see chart below).
It gets worse: "The national CPI will follow the Tokyo measure back down to zero or below in the months"ahead. This is likely put tremendous pressure on the BoJ to ?do something!?." Well, not if the BOJ gives itself more runway as Goldman is suggesting ti has.
To this Edwards says, hogwash, and points out - quite accurately - that once you start QE, you can't stop, especially not if everyone else is doing it, as you will end up right where you started but with massive balance sheet losses to boot (like the SNB).
Regular readers will know that I am pretty horrified by the global Quantitative floodgates that have been opened since the 2008 Great Recession. Once an emergency measure of dubious effect, it is now a never ending stream of confetti money being thrown around the world to inflate asset prices. QE has now become the policy variable of first resort. Personally I think this will all end very badly. But why, I often asked, am I so much more positive about the Japanese outcome than I am the US, UK or eurozone?
To be sure I would agree with the Japan sceptics like my former colleague Dylan Grice, John Mauldin and Kyle Bass. But I am bullish because I believe that the Japanese fiscal situation is so bad that the authorities had no option but to begin their QQE in April 2013 and there is indeed, as Peter Tasker says, no turning back. Russell Jones is also correct that the BoJ will become more and more aggressive and inventive for the simple reason that Japan is bust.
Or, to paraphrease, loosely, Fight Club, it's only after you've lost everything that you are free to do endless, unlimited QE. After all, what's the downside?
Personally I have little doubt in my own mind that the Japan government is bust. Many other countries are too, but Japan is much further down the road. Japan?s lamentably low trend growth rate means it cannot possibly pay off its 260% of GDP debts (or even its 140% net debt). That is why it needs to default. That is why it needs to create inflation. And that is why, as John Mauldin puts it, Japan is a bug looking for a windshield. The easiest way of demonstrating the Japanese government problem is the chart below which shows just how massive Japan?s avalanche of bond issuance was in 2013. The problem is not the ongoing deficit at 10% of GDP (now down to 7% of GDP). It?s about the rapid roll-over of existing debt with a short average maturity, which means that the government has to come to the market with near 60% debt issuance relative to GDP each year (apologies for not updating the chart but it still makes the key point). That is why there is no alternative to QQE in Japan.
Edwards is again correct when he points out that "Unlike Switzerland, for better or for worse, there is no turning back, for in Japan they are all in. Peter Tasker and Russell Jones are right, but so too are the sceptics like Dylan Grice, John Mauldin and Kyle Bass."
His conclusion on Japan:
Ultimately the pressure point remains the yen and in a currency war race to the bottom I have little doubt that Japan will be the unintentional winner. Our bold end March forecast of Y145/$ may have been missed (I was advised at the time never to give a point forecast with a date attached), but once we break the key Y122/$ multi-decade support level I think we will get to Y145 in a flash. With CTFC data showing speculative net shorts in the yen at the lowest level since QQE was mooted in the autumn of 2012, and with the market having moved sideways between Y118-122 since the start of December 2014, the speculative and technical excess has been unwound, readying the currency for another major move. Most likely the trigger will be another surprise BoJ move...
So while the US may be on a verge of a recession that will shock markets, Japan is just exiting its third downturn since the 2008 Great Recession, with a new round of QQE beckoning and a wage/price spiral now within the BoJ and Abe?s grasp (whatever its merits). Personally, like Dylan and the sceptics, I believe the Japanese authorities will probably lose control of the inflationary situation and that is why I am so bullish. In that context we must highlight our 2010 note calling for the Nikkei to hit 63,000,000. Who says I?m an über bear?
But don't worry: Japan won't be alone, because as soon as Japan reignites the printer, the rest of the world will have no choice but to follow:
The Q1 US GDP data was a major disappointment to the market as business investment declined due to the intensifying US profits recession. Only the biggest inventory build in history stopped the economy subsiding into a recessionary quagmire. The US economy is struggling and the Fed will ultimately re-engage the QE spigot. Talk is growing that China will soon be doing the same as local authorities struggle to issue debt.
His conclusion: "Low growth (and inflation) to prompt more QE - everywhere!"
Now, about that "imminent" Fed rate hike...
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That's Japan, but we are still exceptional, aren’t we? Please? ;-)
Looney
Exhibit A on why this country is F**KED when this is a news headline:
Sharon Osbourne: 'When I Pee I Don't Flush; Only When I Go Number 2'...
Define: "News" Kruggie
Soon she'll be educating people NOT to poop in the commode, but instead poop in the plastic bag that the state mails to you every month. Put the zip tie on and mail it back to calrecycle.
No water.
"Oh Ozzy, you missed again!"
How many moons ago were we yelling "liquidity trap" around here? Many, by my recollection
If we knew with certainty WAY back then how this was going to end, there is NO WAY the elites don't know it as well. The next collapse may not have a date-certain on it, but when it happens, it will definitely be intentional.
More QE coming but it won't be enough...governments/CB's creating credit but they won't be able to make up for falling credit creation among consumer and financial sectors...and if rates don't continue going down, probably kiss the corporate bond issuance as well...hypermonetization seems likely
http://econimica.blogspot.com/2015/03/are-seeds-of-depression-sprouting.html
QE is just a tool to aportion the loses to the little people vast majority and help the "important people" maintain their wealth.
CBs are very determined. They will continue giving trillions to billionaires until the economies improve.
No question CB's are all in - the question is if all the other sectors of credit creation are makedly slowing...can CB's credibly take up all the slack? More typically this is the hypermonetization blow-off scenario, but who knows.
China was the last great engine of credit growth...responsible for 1/3 of all global credit (debt) growth from '07-'14...but the driver for all that debt, real estate, is going tits up in the 3rd great RE bust of the last 3 decades following Japan and the US's lead.
All's that left will be gov debt and QE...sorta what everybody predicted once we started down this road.
Nice summary.
Indeed
FROM THE FIRST SUBPRIME MORTGAGE UNTIL THE FINAL COLLAPSEmoar.....Moar.....MOOOOOAAAARRRRR !!!!!!!
https://www.youtube.com/watch?v=JKRu-xH58E8
https://www.youtube.com/watch?v=bT8CRi9k4bo
https://www.youtube.com/watch?v=wRnSnfiUI54
Don't know if you are clairovoyant, but..... https://youtu.be/J-2k-M1dBxI
Financing the WarWhere did the money come from to buy all these munitions? Then as now there were, the experts agreed, three basic ways to raise the money: (1) raising taxes, (2) borrowing from the public, and (3) printing money.
http://eh.net/encyclopedia/u-s-economy-in-world-war-i/
More info on financing wars....
http://www.britannica.com/EBchecked/topic/635642/war-finance
More info on Quantitative Easing (QE)
http://en.wikipedia.org/wiki/Quantitative_easing
Nah. The world economies are bursting with growth and wonderful activity. There are global shortages of even unskilled workers. Everybody are so happy they're sharing spit in the streets. The true nirvana of the NWO has arrived! Tighten policy now before the world overheats.
Peace and love amongst us all, my fellow brothers and sisters.
Why even the predident recognizes this saying that the world hasn't been this peaceful, ever.
I'm so happy even pooping in my pats is nice
https://www.youtube.com/watch?feature=player_detailpage&v=_x2m6i4KFqg
I see the lobotomy has done wonders for your outlook, nucks.
MOAR ! MOAR ! MOAR ! MOAR ! MOAR !
“they” aren’t as smart as “they” think they are. “they” certainly aren’t as smart as “they” want us to think they are. However, “they” aren’t stupid, and neither are we. It was always going to be MOAR. Only an idiot would believe otherwise.
this goes on until currencies collapse. If you time it and can get out, stocks are not bad. Take profits and buy gold.
Who prints last prints best.
Liquidity relief for a structurally mad world. Will have as much relief as the Midas touch.
Free liquid squirted into a broken barrel.
hahaha, ever heard of the Cask of Danaides???
At least the little fella in Brussels pees like a human.
These guys pee like Leviathans!
Maybe those guys on the Everest know best. When an avalanche comes you don't throw $ notes at it!
So we just sit back and wait for the trickle down?
Been 35 years now. Haven't seen a fucking trickle. At all.
Psst... that isn't rain.
Bankers have moved on to tinkle-on economics, the public best keep their eyes and mouths closed.
Rate hike of 0.25% in September
Rate hike of 0.25% in Spring
Rate stays at 0.75% and they start another QE in Fall 2016
that should spark some serious inflation...............
MOAR !
https://www.google.com/search?q=MOAR+baby&tbm=isch&imgil=5YJ_gOYfAVt8RM%...
you think the fed can hold off overt qe for another year and a half? wow that is really optimistic.
It's all global - other's are QE'ing now. Fed will step up next year as ECB QE ends.... and round and round we go.
imo it will be all hands on deck sooner rather than later. the boj and ecb can't even keep the home fires going much less stoke the global eCONoME. we both know that qe does nothing for grass roots demand but that won't stop them from doing it.
You're forgetting China ..........
They won't need QE because there will be enough demand for treasuries and bonds with higher rates.
Past patterns are not a sureway to predict future behavior.
Really? How will liabilities get paid and exisiting debt be serviced at those higher rates? Do tell.
Paid in full with skittles pal. From skittle-shitting unicorns.
What do you say to that, smart guy? Huh? Anything? Nuthing? Yeah that's what I thought. Tool.
good, people have been making fun of my unicorn investments. I feel much better now.
the next fed qe won't be for buying treasurys methinks.
No rate hike in September.
No rate hike next spring.
QE4 starts in October.
At some point, all those paper promises will start seeking out real assets...
Considering how big that pile of physical and digital paper has gotten, at this point, what difference does it make...?!?
/s
"Our bold end March forecast of Y145/$ may have been missed"
ha ... i laughed when he made that call
QE/ZIRP/NIRP is disinflationary ... deflationary when asset bubbles burst.
some day ... far far into the future ... "experts" might figure it out ... or not
yes someday, with nothing but a scorced earth and the few remaining humans that were unfortunate enough to survive. "Deflationary" indeed, everything you can pick up and carry back to your island tribe will quite literaly be free.
As Charlie Sheen says, "winning".
Hopefully Housing and housing costs will Deflate, but Bankers, Mortgage Servicers, Government Officials may be able to control the Housing Supply by delaying Foreclosures or creating new Investors to purchase housing.
Hope that Gold & Silver Inflate, but not sure what effect that has on Technology or Tech Industry & R&D.
- I Suppose that the Vision of deflation is that Wealth and Growth of Middle Class has nearly reached to Global Top... so that even poor factory workers end up getting less wages in a Deflationary Environment... and somehow we still are able to get our Fruit, Produce from overseas
- I'm not clear how Education & Health Care get deflated, somehow Executive Compensation must shrink along with regular employees and purchase of Capital Equipment & Capital Facilities
- I would think Massive Illegal immigration is Bullish for Deflation
Cash, Rules, Everything, Around, Me
C.R.E.A.M.
Get the money
Trillion dollar coin y'all
-CB Clan
I like what Edwards is saying. I have always liked what he was saying. That is why I have not made any money in ONE OF THE BIGGEST BULL MARKETS IN HISTORY. Maybe he will be right one day before I die. But then, too late.
"I got a fever and the only prescription is more cowbell!"
< Au price goes down some more, then up.
< Au price goes up from here.
endless QE is easy, it's stopping that's the bitch, ask Zimbabwe or Venezuela
WWW (World Wide Weimar)
Damn I cant wait for gold to shoot up already!
Hopefully within 2 years we will be much higher
Harry Dent was saying on USA Watchdog that Au is going to go down to $700-$800, perhaps lower.
Should we believe him?
The guy is delusional and just flat wrong.
Only if you believe real interest rates are going up.
Albert, they say that even a stopped clock tells the right time twice a day.
My Quantitative Easing allergic reaction has flared up.
Back at you, Mother Dyke of Federal Reserve.
If you can't hear the war drums beating, you're obviously deaf, dumb, and blind....
(All that rioting worldwide since 2008 was no small matter)
Hmm, as a conservative. See the dumbbell fuck Kenyan as a different story
Speaking of Kenya....
http://www.goldplat.com/projects/kilimapesa-gold-kenya
http://www.standardmedia.co.ke/article/2000109104/kenya-can-produce-12-t...
“Maybe self-improvement isn't the answer, maybe self-destruction is the answer.” Chuck Palahniuk, Fight Club
What happens when an entire country has a divide by zero fault. Has anybody debugged the error handler when infinity has control?
US .gov competes directly with European Investments and CONUS Investments... and Chinese and Japanese Investments.
Sort of like Planners made everything so complicated they don't see the increase in ownership of US Long Term Treasuries along with the Increase in US Exponential Debt going back to look at 2003 onward.
Yeah TBTF Blew up Global Economy, then paid off Employees with Bonuses to Keep Quiet, then Systematically set out to Offer Private Federal Reserve Loans to anyone with Big Power & Wealth, then they set up QE to 'Buy' the Toxic Derivatives off the Books of both TBTF and their Powerful Victims.
- Massive Transfer of Wealth to those that Created Inflation in Housing, Insurance, Property Tax, Housing Tax, New Banking Fees, and a Banking Industry that has little need for Voters/Citizens Deposits in order to acquire more power and wealth
- Both TBTF & Federal/National Politicians are Completely Devoid of any responsibility to Main Street, Pensioners, Fixed Income People, Depositors, Voters, and Small Businesses that can't afford high court costs and don't have the Advantages and Tax Loopholes of the Wealthy
Zero stupidity to rain bullets into a crowd of stupid central bank planning systemic risk takers. That should riddle the crowd of fraud.
Central Bankers are no different than the niggers rioting on the streets.
struggle to issue debt..........
in the words of the great trav7777........
''It would behoove EVERYBODY to understand what we who speak of this mean by it. ONLY growth in credit can prolong the system and it is *required*, not optional.
Austerity means a monetary collapse. Via deflation.
The ONLY way to stop this if credit cannot or will not grow is via brute force devaluation. In the end, the deflation and inflation arguments end in the SAME PLACE.
That is why I do not understand why people fight over this.''
http://www.zerohedge.com/article/rethinking-inflation-vs-deflation-debate
Doesn't it suck to get caught into your mess?
The next logical step is for government to significantly reduce taxes and fund the deficit with more QE. That will generate more consumer spending, at least once they have paid off debt and paid for inflated priced food.
It is like after the 2008 -2012 Global Crisis and on to today the whole G20 Agreed to let USA & Japan Print Money and engage in a Currency War (ZIRP & QE & FED Loans)... hoping that the Carry Trade and Low Level investments would pull the Globe out of Crisis and Keep Free Trade Going.
Then EU went Full Retard with NIRP and now trying QE while US Long Term Treasuries looked like the safest Investment.
War continued after 2008 and US used more Fiscal Spending by Federal Government to Massively Stimulate Corporations. Then apparently satisfied with progress decided to topple Libya & Syria while arming Al Qaeda and ISIS for Regional Chaos to remove segment of Middle East Consumers & Investors. Again USA Satisfied decided to dethrone Vladimir Putin and Remove Russian Federation from the Western Consumption and two way Investments (some to Syria).
--------------------------------------------------------------------------------
- Appears to be a Deconstruction of Russian & Middle East Production, Consumption and Investment
--------------------------------------------------------------------------------
- Also appears to be a Currency War, Massive Funding and Support for Western & Allied Corporations
--------------------------------------------------------------------------------
- Clearly Economic Classism, Hegemony, and Attacks on Common People in Foreign Countries and their Sovereignty
--------------------------------------------------------------------------------
- The Result CAN ONLY BE Eventual Turning and Feeding on US Citizens, Massive Inequality, Federal Election Rigging, Granting of Vast Powers to Financial Institutions and our Biggest Industrial Leaders & Corporations
--------------------------------------------------------------------------------
** OH WE ARE ALREADY THERE, that was S/
The unemployment rate is too low.
Raise interest rates.
Wage inflation is too high.
I like playing the devil's advocate.
Debt over a Quadrillion, on its way to a Pentillion, a plummeting birth/death ratio, and an absolutely clueless political system; look up "fucked" in the dictionary and you'll see a picture of the island of Japan.
www.traderzoo.mobi
We will become Rick as your little fucking gay partner. Disputing 50% property rights. The BAR association will make a little money this year.
/sarc
New Obama statement: We will transform America into a 3rd world NIRP economy.
Don't forget to facebook Janet Yellen.
/LMAO
Why of course there will be more QE. Do you expect the Federal Reserve Board of Governors [all 7] to work tirelessly, take work home with them and work weekends to find a solution? When you get to that position, you seriously CRUISE, not WORK!
Every meeting consists of:
What do we do?
Print MOAR....
Meeting adjourned!
Then they go back to playing golf or lining up cushy consulting jobs once they leave the FED.
The LAST thing on their minds is finding a solution to our nation's economic ills....
THAT's why they deserve to swing from light poles...
http://d22zlbw5ff7yk5.cloudfront.net/images/stash-1-509b04fe13100.gif
QE4 will have to be directly purchasing equities to save the stock market this time around
1) I am still waiting for someone to show me in the Regulations of the Federal Reserve System that madcap printing of money has to be announced to the government and general population.
Occurrences like 'Tarp' and 'QE3' which are made public to supreme drumrolls are only so proclaimed to not only ease our neighborly sheeple into the shearing house, but to ease the Wall Street sheeple into long positions before 'le deluge'.
2) I thank the author for this tidbit of info.
One of my worst memories is the Inventory Recession of 1973-1975, when the market which had just risen for the first time to over !000, plummeted by over 50% to 470 something. The bad news was it was an inventory recession, The good news was that the Fed had not yet begun to print.
There was no pom pom propaganda press then and we were very worried.
The Dow index itself had to put in a "head and shoulders" bottom to get everyone out of the tornado shelters with Dorothy and Toto.
3) Is China going to pull out all the stops to invigorate its economy knowing that it's assisting the buccaneer of the South China Sea? Somehow, I don't think so.