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Cultish Fervor - Japan Is In QE10 And Is Going Nowhere
Submitted by Jeffrey Snider via Alhambra Investment Partners,
When the Bank of Japan announced on October 31, 2014, that it would increase the scale of QQE to ¥80 trillion annually, it noted the usual surfeit words that have clearly been passed around to everyone within network connectivity of the central axis of orthodox economics. You can honestly close your eyes and have someone read aloud the text and you would be very hard pressed, omitting specific references, to determine which central bank or nation it came from. All the buzzwords and phrases were there, including: “continued to recover moderately”, “above its potential”, “temporary weakness” that had “started to wane”, and the “decline in crude oil prices will have positive effects on economic activity.”
From all that you might ask yourself why would the BoJ need more QQE when its own argument put forth suggests exactly the opposite. Such contradictions are scarcely the exceptions, as the entire idea is itself at odds with itself. Apparently the only true economic danger in Japan, as elsewhere, is not the actual economy (which is always terrific or just about to be) but the evil, dreaded “deflationary mindsight.” So the BoJ upped its ante in case Japanese people start thinking unhappily about what QQE might not be able to do with, apparently, no real basis for them to actually think that way. Thus is the treasure of monetarism as it applies “forward guidance” and the Krugman version of “credibly promise to be irresponsible” as if nobody should notice anything but the intended happy ending. It really is the monetary equivalent of “the beatings will continue until morale improves.”
But Japanese observers, if not the Japanese themselves (who have shown a great deal of apathetic complacency even recently in sort of supporting Abe), have already noticed the broken record. It even goes back to the original QE in March 2001 when the BoJ explicitly gave much the same goals for that world’s first monetary outbreak. Reaching for something they termed the “time-axis” effect, the BoJ fully expected that reducing the rates on longer-term instruments would have a direct and opposite effect on inflationary expectations; so long as that action would continue until rates, of their own, began to rise and signal an end to the “deflationary mindset” (Krugman’s credible irresponsibility). Little attention was paid to side effects, theoretical and otherwise, including a big one right from the outset – if QE worked, or even was taken to have that potential, then bond investors would already anticipate higher interest rates from the start and therefore undermine QE before any “mindset” was incapacitated by the flooding.
There was also the small matter of bank reserves having little actual meaning apart from signaling only what the BoJ was operationally doing. There is quite a ways between bank reserves and actual and intended action in the “market” as the wholesale morass can make plain on any occasion. Indeed, while the BoJ in ending QE in 2006 believed it had worked there is a decidedly mixed academic verdict; which is really quite damning since these are the very people who believe in it in the first place and in many cases went looking for that view. Even those “studies” that found some regressive correlations limit their conclusions to “market” or price effects rather than actively trying to overcome the burden of this:
There may or may not have been some financial effects attributed to three years of increasing bank “reserves” in that first QE age (from 2001 to 2006) but there aren’t any directly detectible economic outcomes and certainly none that would suggest the primary economic goals were even close to being met. And that view obscures the fact that the BoJ in October 2002 had done just the same as it was doing in October 2014 – adding an additional QE layer. The buildup in the QE buying program was actually two, just like the Fed’s QE2 closely followed the end of its QE1. In fact, that is the universal element attached to each and every version, in that none of them (we will see if the ECB is the exception, though signs already point to not) seem to be able to achieve without subjecting at least another (and another, and so on).
In the case of Japan, it has been nine others and counting – perhaps ten depending on how you interpret and classify what the BoJ did in February 2009.
In fact, like all the rest, there is scarcely a block of the calendar since the “impossible” global panic in 2008 that hasn’t seen any of them doing something to expand their balance sheet or impress the “time-axis.” By my more conservative count, qualified as the BoJ doing something different rather than purely expanding or extending something already in progress, there have been 10 QE’s in Japan but using the numerical standard which has been applied to the Federal Reserve there may have been as many as 22 or more.
What none of those have amounted to is an actual and sustainable economic advance; NONE, no matter how you count them. In very simple fact, the idea that central banks “need” to keep doing them in continuous fashion is quite convincing that at the very least they don’t mean what central bankers think they mean, and perhaps worse that the more they are done and to greater extents the more harm that eventually befalls. It isn’t difficult to suggest and even directly observe that Japan’s economy has shrunk during the QE age, but that fact isn’t applicable to Japan alone (there are sure too many non-adjusted data points that uncomfortably assert the same for even the US). That would seem to at least offer a basis for a “deflationary mindset” no matter the actual economic effects.
So you truly have to wonder these kinds of days, like today:
Global equity markets rose on Wednesday, led by an 8 percent surge in Japanese stocks, helping lift the dollar as the prospect of more economic stimulus out of Asia soothed investors rattled by recent market turmoil.
The charge into stocks pushed yields on low-risk government bonds higher, and a sale of German 10-year debt attracted bids worth less than the amount on offer. The U.S. Treasury is scheduled to auction $21 billion of 10-year paper later.
This is not so much investing or even finance as it is a cult (calling it a religion or even ideology is unjustifiably too charitable). That is the usefulness of “deflationary mindset” not so much as a matter of actual economic pathology but as a built-in, squishy appeal to “we’ll get it right next time.” And there is always, always a next time which doesn’t seem to count for much inside the cult when, in fact, it is everything.
At least Reuters’ description of this morning wasn’t without unintentional comedy, as the article followed the quoted passage above by describing oil prices giving up “early gains, beset by ongoing concerns about oversupply.” It couldn’t be global “demand” because of all the repeated and enlarging stimulus. If energy “oversupply” could ever really be responsible for the “deflationary mindset” then the world is truly in trouble, perhaps to the point of unleashing not higher ordinal QE’s but even QE’s of QE’s. If we are going to defeat a mindset, then we must truly escape thoughts of convention and start thinking nuclear. When we get to QE^squared then we are really talking credibly irresponsible; when QE10 is remembered as a rounding error, it can’t miss, right?
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Japan is a real time demonstration of why the FED is pissing into the wind. Unfortunately, our elites think they are smarter than their elites......
I would be curious to see what income disparity figures are for Japan. If, like here in the States, the oligarchs are resplendently feathering their nests
in a disproportionate manner to the serfs, and if, like here, the political class are receiving kick backs from said oligarchs, then rather than being folly,
QE has been an unmitigated success, as long as, its largess benefits the ones who have implemented it and maintain it; but don't proportionally
pay for it. We can believe what we are told that the function and purpose of QE is, or we can look at what it is actually doing, and surmise that its
actual agenda is being realized. Do we think that QE type policies would continue if they were financially detrimental to the truly rich? I think not.
Remember when the west used to criticize Japan for QE? It was argued that the Japanese should let their zombies go belly up and be bought for pennies on the dollar by the west.
Ah, the good old days.......
The Fed is wearing us as an outer garment. They do not care.
I thought it was on the highway to hell. All those QEs have been a bigger disaster than Fukushima.
Yes QEinfinity has been a disaster but not quite like "the gift that keeps on giving" in Fukushima.
Currently still pouring radioactive waste directly into the sea as they cannot control the current rain/waste flow
http://mainichi.jp/feature/20110311/news/20150909k0000e040199000c.html?i...
{right click to translate to english}
you'll know it is bad when the financial kamkazees start showing up
You mean we have to send the Fed all the way to Japan? Geez.
Quite amazing....if it wasnt for the sheeple in Japan that do anything for the motherland...it would have failed years ago....but they like sheep...do as their masters tell them to do...but the bonds....just shut up and buy the bonds....and they do
Same thing is happening in America. The propaganda and indoctrination is working well.
If it really really is about "mindset" (or as Krugman says, "believing") then wouldn't a rational person quickly ascertain that serial failures of a policy intended to overcome a certain "mindset" would, in fact, serve to reinforce that particular "mindset?" Do Keynesians even have mentality? Or are they really "cultish" in that normal rationality doesn't apply in their sphere?
Let the negative trolls weigh in. Tell them unicorns don't exist.
You know, maybe the central bankers only ever talk with the most wealthy of their society, who say that everything is fine and the QE is really, really helping. Then the wealthy somehow get the 'official' numbers to be fudged and voila... they get free stuff! Same ol', same 'ol as the FSA, just at another level. Humans are all the same.
In short, those who are TAKING now “outnumber” those who are producing and required to PAY at the point of a Hired Gun, a Mercenary — and like any leach or tyrant throughout history they always ‘demand’ MORE from you and yours … But For: YOU have by your acquiesce, contributions, inactions and silence over time become the Delegated Debtors of your own wrong, and with your assent!!! How do you spell CONQUEST, DOMINATION or SUBMISSION???
Also, http://www.fromthetrenchesworldreport.com/mysterious-september-15th-warn...
And off topic because I have to get much work done today and cant post til later tonite. , but a song to just kick back and forget all this shit for awhile: 2 years ago, my stepdaughter of 11 years committed suicide, and my wife went insane..we had a good family....shit man....sorry been drinking a bit today. two years and I still see it all in my head. Sometimes, most of the time, this economic bullshit means nothing to me...sorry, I consider many of you all my friends, and just crying today..
fuck the bankers, fuck gold and silver, fuck equities and oil prices, fuck the economy, fuck the government....but most of you have been fun...thanks.
https://www.youtube.com/watch?v=BngAj8xV3Os
of course, japan macro economics can't be analyzed without the big demographic asterick qualifier. japan's population is contracting by a little more than 1%/year and will accellerate to 3+% in the near future. in macro economic efffect if japan's economy can grow any faster than negative one per cent then it is not doing so bad.
japan is the anomaly compared to the other first world economies. it depends upon financialization like the rest but the demographics of the country make the continuation of the scheme mathematically impossible. the ponzi con is literally running out of marks. the only way out is a reset. there will be no growing out of this deflationary funk for a long time, otherwise.
If we include TARP 1 and TARP II, QE Twist, and countless other "easing" programs, the Federal Reserve Bank is on QE X too.
It's all about demographics and supply/demand. As the supply of citizens in diapers (both old and young) increases, the demand decreases for credit/debt and interest rates falls. The debt monster must be fed lest it wake up so you get QE. Think long term folks and look at the graphs.
Old people like to live poor...they brag about it even...one old bastard I know made his own dentures out of JB weld and seashells.
there isn't a huge wealth gap in japan. japan is a very wealth ycountry. it has never been a consumer economy in the manner of americans. much of that is due to a cultural frugality that discourages waste and space, there aren't many three car garages. despite all the gloom you hear about the japanese economy the average japanese middle class salaryman is not doing bad and the economy is not miscounted by the number of employable unemployed people. they have a demographics problem that will need to be faced but the japanese leadership, even the well organized and established political/economic counterparties, really tries to think of japan first even when they mess up.
having said that, the leadership in japan is filled with family and organization influence ingrained into japan politics and economy for hundreds of years in some cases. there is a lot of privilege awarded to those in that class and very little resentment by the japanese population. the biggest difference between the usa and japan is the way things are looked at. an example: the western tradition going back to the assyrians through egypt and greece to the west there has always been an exploitation of the poor meme as if it were the key to empire success. in japan the the philosophy of the wealthy and political class is to take care of the poor because they will make you wealthy and powerful.
Yep and we're headed down the same path of no growth... Thanks to bubbles Bernanke and Granny Yellen.
Do a QE where you actually say print 10 grand and put it in everybody's bank account.I'd immediately go out and spend it all on Gold.
fall daown eight times stand up nine, or ten, or more if you reeeeally need to.
~Japanese saying
I've been asking ZH crowd to watch the movie "Princes of Yen" It is on youtube and only a few finger clicks away.
How about a little homework so you can put Japan into context?
Japan used 'CREDIT WINDOWS' for their post war miracle economy.
Credit Window regime was OVERTURNED by BOJ.
Bank of Japan (BOJ) purposefully blew a gigantic housing and real estate bubble in order to transform society into one run by finance. More on the why is included in movie.
During bubble, Japan came to be valued as 4X the worth of Canada and the U.S.
I'm going to repeat in case you missed it. Four times.
This sort of malfeasance cannot be oveturned easily by QE, especially when QE doesn't address the root cause, private debts and too high property prices. QE money does NOT reduce private debts and property prices. Nor does QE go into productivity - it goes into finance.
Japan's demographic decline is entirely consistent with a debtor population.
Long range K selected people, like Han's (Japanese, Chinese, Koreans) will not reproduce unless they can see a future.
Debt money systems are deathtraps for K selected ice-age people groups, like NorthEast Asians, and NorthWestern Caucasoids.
You want national and racial suicide, then keep on going with the Jewish debt money system. It is real healthy for humanity.
sovereignmoney.eu
QE is no longer an option. It is a requirement. Clearly, hyperinflation is inevitable.