The Incredible Shrinking Benefits Of Massive Japanese Money Printing
Excerpted from JPMorgan CIO Michael Cembalest 2016 Outlook,
Something is wrong with this picture. In the US and Japan, corporate profits sank during the global financial crisis. In the US, the profit recovery was accompanied by a recovery in household income. In Japan, however, corporate profits and household income moved in opposite directions, as dynamics that helped profits recover did not help consumers.
How can we explain the outcome in Japan? The benefits of a weak Yen are mostly concentrated among large corporations, given translation gains on offshore non-Yen income relative to Yen-denominated costs. For smaller companies and households, a weaker Yen simply resulted in imported inflation. While consumer spending has stabilized after a decline caused by the imposition of a Value Added Tax in 2014, there are few signs of a rebound to pre-VAT levels. Japanese GDP growth has been volatile and averaged 1.5% in 2015; we’re expecting a similar outcome in 2016.
In October 2015, the Bank of Japan did not take further steps which markets were anticipating (e.g., an increase in equity ETF purchases from ¥3tn per year, an increase in REIT purchases from ¥90bn per year or an increase in government bond purchases from ¥80tn per year). Perhaps concerns about the negative domestic impacts from a weaker Yen are affecting BoJ policy.
Our contacts in Japan believe that the BoJ is no longer being pre-emptive, and will wait until November 2016 to act.
The Japanese experiment.
There are few precedents for the kind of experiment Japan is conducting. At the current pace of BoJ purchases, private sector banks might actually run out of JGBs by the end of 2016, at which point the BoJ would have to buy them directly from the non-bank private sector; I think it’s fair to say that no one really knows what would happen then.
One thing is certain: like riding a tiger the BoJ can’t stop now, and has little choice but to continue with debt monetization as Japan’s Federal debt grows higher, and as it veers further and further into the economic unknown.
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"Banzai!"
"A professor I once had told me this was impossible."
Not when you are visiting The Outer Limits of insanity. We humans are such fools.
There was a young lady of Niger;
who went for a ride on a tiger;
they returned from the ride;
with the lady inside;
and a smile on the face of the tiger.
Moral - there is always a return home no matter what.
Not bad (which is quite a compliment, in case you are not fluent in Minnesotan)
moral no.2 - there is always a fitting limerick!
speaking of limericks, where has our noble Limerick King been ?
Punishment for joining the germans. Bow to your jewish overlords.
lol, so if you are a loser deadbeat without self-control who maxes out his credit cards, it's not really your fault, it's the jews' fault?
The lure of instant gratification is a powerfull tool of bankers.
Japan is a vassal state.
Well, at least they can console theselves with 'Fukushima' power generation.
I wonder when someone will figure out the "foldable screen"? [ cellophane laptops]
I have to burn new ISO's monthly, because of those chinks that work for the NSA.
I'm being facetious, but my synaptic package manager has all these weird entries [lol] ... It's probably phonystar.
We Banzai'd some folk's....
"Recovery in household income" in the US? Lost all credibility by the third sentence.
The 1% = 100% of income growth
NOT the 1% - the 1% are your small businesses with a couple employees who are the backbone of America and are being destroyed on purpose. You mean the .001%
Fixed it for you.
I'd feel much better believing that the top 1 percent, (that is to say the top 3,200,000,) were running the show. That sounds almost democratic compared to the top .001 percent or top 3200.
I think the household income rise was relative to the corporate profits, shows how bad they were.
Bill Gates walks into a bar, and the average income of eveyone in it goes up a thousand-fold.
Our guy in Japan was in town about a month ago. The dude was in his late 50's but looked like he served on Gaudacanal - salaryman live hard in Nippon.
Anyway, he has seen the whole cycle from 800 pound gorilla to clapped out economic shell.
So as he's pouring drinks down and loosened up I ask him - 'so tell me the good news about growth in Japan'
Him: Much money for clean up at Fukushima (the Japs will not even mention this unless pressed...) and the most important event .... Yes?.... The Tokyo Olympics. Much money for infrastructure!
And I was like - dude! That's 5 frickin' years out!
(They are fucked - Capital 'F')
Consider that the US switched the mark to model in early 2009 and is still doing it. So who needs the 'market'? It doesn't seem to make a difference. The whole thing is quantitative pure abstraction so what does it matter if you change the rules? Clearly you can. There are no rules except the ones we chose to consider to be hard rules. Those have 'effects', but only if we chose to recognize them, 'Schrodinger's cat' style. But those rules can be broken, changed or ignored too.
Result = no effects
The 'effects' are our own systemic choices.
So are they really "capital-F fucked"? Or are the rules changed, and prior expected effects not consequential any longer?
How can a fractional reserve money system be other than a variable fantasy in all respects, if you so chose? If every one agrees the effects of debt printing should not apply, they don't.
Same way ad-hoc dismissal of mark to market means it no longer has effect, every one agrees it is not effective, so it isn't. Doesn't matter what rule you use to invent money, if everyone agrees the invention is 'real', it can be traded for real resources. The debasement isn't occurring.
Metal coins can be debased, but it is not a concept for what digits represent, as value, for whatever you agree they are able to be traded for, is the value. There is no debasement but the debasement you decide to apply.
Same for mark to model. Market value is marked to "make-believe".
Now if we can just do that to interest rates, and debt ... we're all good again!
All it takes is a collective choice to change the rules to ones much less economically harmful.
When the FRNs were debased, prior to FED printing, they just called it inflation, so you could buy less real resources for the same paper. So if 'printing' is also further abstracted into digit conjuring, the money value is indifferent to the real resource level, but merely floating on the collective bid level, then inflation is not needed to debase, nor missed if it's not present.
The great scam of fractional reserve inventing debts, as money, paid into banks by debtors, was convincing people that the rules couldn't be changed - if you didn't pay you were inescapably "broke" - and that is the lie of all lies.
And we can see that because the banks were all broke, on the rocks, but the rules did not apply to them, at all, because the rules actually could be changed to anything desired.
Well they can be changed for everyone, if they can be changed for anyone!
But there are still the institutions who want us to pretend that only banks are 'special' in the infinitely flexible rules department.
We're not in Kansas any more.
We are wherever we decide we are.
[well, ... until that imaginary consensus evaporates via being challenged by an outside force. So there can be no outside forces, everyone has to be on the same (imaginary) page for the rules to be whatever we chose them to be.]
+1 element. who, in the emperor's convention, is interested in pointing out that most are naked? those wearing only thongs? those who can picture the consequences of such a deed?
consensus is indeed a human "force of nature". it shapes customs, the true kings of the realms, as well as politics, the economy and markets
yes, it is imaginary. no, that's a feature, not a bug. a non-imaginary consensus would not fit into one man' mind
Imagination is thinking G, every thought is an imagination, whether correct or false. It's a double-edged sword and imagination is often an insidious force in our lives. It seems to do far more harm in the world than good today, as it is routinely miss-used. Extended beyond its capacity to assist us, and not just impair and harm us. That's the norm. Whatever, but we should be explicitly aware of it, and its global and individual pervasive effects, wouldn't you say?
And humans almost entirely aren't explicitly aware of it, or what is occurring.
Their lives are usually a detritus of past imaginations, some go OK, some go really well, many destroy them mentally, and also physically.
What we most of all don't know, at all, let alone explicitly, is that imagination is the lesser part of a human, which is to say, the thinking and thinker is not what we are only able to do or be, as a 'being'
Imagination is the shadow - not the caster of the shadow, let alone the illumination of the caster that throws the shadow. The shadow is a dismal misleading representation of nothing as something. The thinking imagination we remember, is not what we are. We've never been that.
What we really are is not imaginary. Imagination can't even approach what we actually are.
The "more harm than good" is who or what we are aspiring towards.
The growing harm right now is the imaginations of all the current rulers, apsiring people along their path of chaos and turmoil. As more people question WTF is going on more are going to crave some alternative path.
So my thought is "can the whole world revolt in one go to throw out the current incumbents everywhere and their blight on humanity".
You'd have another bunch just like them in a few years.
As far as I'm concerned the nature of a mind that can't help but live in a continual string of imaginative perceptions of the world around, is something each person has to clear up individually, not collectively.
There's no 'solution' to the world, as it is, but to understand your own mind as it is, because everyone else's mind works exactly as yours does. Understand one, your own, and you understand them all. Only the memories that they contain vary, which colors what they perceive and do, in the present.
Those 9 months in the womb fuck everybody up.
A fantasy template develops in utero that is imbedded in the Amygdala that continually is acted out as a trauma ritual.
And bad parenting across the globe doesnt help !!!
the Tokyo olympics may be 5 years out, but they have to start building now.
Build a whole village, new facilities....
maybe put a subway line out there from downtown or the airport,
but the olympics are typically somewhere between 1-10 billion.
that's not much in an economy like japan...
if that's something they care about, jeez, sure it's like the ted williams tunnel project but,
they have a whole country to fix up.
if fukushima is less money then tokyo, well, it's not much of a stimulus
Love your tell. Earnings season starts in a week. LMFAO!!!
So you are telling me Europe needs a few nuclear meltdowns some of good old Texas tornados and one or two earthquakes for grow to come back? . We are doomed!.
This article was about as valuable as last month's tampon.
Let's see...the brainiac fucking JP Morgan CIO is confused as to why the "markets" are confusing.
Hmmm. Well asshole, it might be that the 800 lb gorilla's (BOJ) unlimited fiat assets are obsuring real price discovery, which in turn obsures real technical performance, which in turn obscures the economic theories built in the last century that you are trying to reconcile.
Everything you thought you knew is wrong, so let's just start there.
Nailed it. <applause>
This is debt devaluation slow motion suicide. Here's the playbook: Money was borrowed with promises to pay it back through basic value creation activities. Lender has a low cost of borrowing, and does next to nothing to value the assets upon which the loan is collateralized. The borrower couldn't create enough marginal value to pay back the loan. Default ensues. The lender "discovers" the collateral isn't worth anything close to what the borrower represented initially. The lender buys a congressman (or, in the Jap case, a member of the diet). Congress abandons all principles of moral hazard, and bails-out the lender (socializing the losses) to "save the economy." Multiply this by 100 quintillion Yen, and you begin to get it.
Just devalue the debt outstanding, and all will be well. Sionara!
We do know the endgame, just not the timing or the nature of the spark that will lead to final and complete destruction of once safe haven JPY
+100.
We know what, just not exactly when. Same for the dollar.
US Household index up from 95 to over 100? I guess those partime jobs pay better than I thought, and O-Care must be really cheap!
Shutting down all their nuke plants and buying NG at $16 per unit (when USA cost was $4) certainly put them at a disadvantage, but since that wasn't bad enough, they had to piss off the Chinese so they couldn't sell their cars either. Central banks can't save you, but they can screw you.
Its a simple question with no known answer.
1) Old people spend money slower than young people.
2) Japan is getting older faster than anyone, so money is spent slower, velocity slows down.
3) Old people borrow money less than young people.
4) Japan is getting older, so less money is borrowed, more is paid back and the money multiplier collapses.
BOJ makes up (sort of) for all this by printing. Japan is supposed to keep getting older for another 30 years. 30 years from now, the number of woman of child bearing age will be a little over half of now.
What happens? Its anybody's guess. Mine is that philipino woman will come to take care of the old japanese and eventually take over the country, just because there will be no japanese left. Probably some hyperinflation at that point since the woman will be young and will spend the money faster.
You have forgotten that people spent money more esasily when they had more job and income security. With less job and income security also came the lower birthrates. That's actually very responsible because when you cannot be sure if you can still pay the rent next year you cannot have a kid. Same thing in Germany; industry wanted low paid insecure jobs, so the already low birthrate fell further. Is this rocket science?
absolutely agree, that is very responsible.
the problem is, there's too many people in the world who are not responsible, who are reproducing at a faster rate than responsible people.
It looks like Greshams Law also applies to the attribute of being responsible.
the simpsons seizure robots
http://www.youtube.com/watch?v=hZzTpjh-NsQ (0:06)
The Simpsons Mr. Sparkle Commercial
http://www.youtube.com/watch?v=CiAaEPcnlOg (2:17)
"...at which point the BoJ would have to buy them directly from the non-bank private sector; I think it’s fair to say that no one really knows what would happen then...."
I have no idea of Mr. Cimbalest's bona fides as an "economist" or his ability to reason from a basic premise but the above quote reveals that he is either a complete neophyte or cannot think critically or that he has no intellectual integrety to spell out the truth. I can tell you one thing for sure. Many of us know unerringly "...what would happen then...." If the BOJ directly monetizes JGB purchases then Japan will enter a hyperinflationary collapse and the USDJPY will go parabolic on the upside. That is the scenario that Kyle Bass at Hayman and the people at SocGen have been talking about for the past 3-5 years.
Both Hayman and SocGen are deep in the money on their respecitve bets about USDJPY so that should speak volumes to the likes of Mr. Cimbalist.
It's very simple. Share investing is not so popular in Japan. Rising share prices do not create as much "wealth effect" as in countries, such as the U.S.
Besides, foreign investors account for a large proportion of stock trading in Japan. So, a significant portion of "benefits" from the BOJ money-printing flows out of the country.
My how times have changed...back in the 1980's (that is a long time) the media was spouting how Japan would overtake the US by 2000..and it would be the largest economy in the world...it is so damn hard to get predictions right...
China did, and by 2050 India will.
Just crash the fucker all ready
Whats this?
http://bitcointicker.co/
http://www.coindesk.com/price/
Am I seeing lack of arbitration? The spreads are pretty tight right now.
You're welcome foney-star.
Summer holidays ... a tiny number of traders normally, and a lot less at the moment.
It's OK, our financial lords can keep printing money to themselves and erect barriers against the common man to kill end demand, then blame them for dragging down the economy. It's a wonderfully fair game!
The financial beatings will continue until end demand improves?
Any country occupied by Murka is being occupied by the Jewish RAT bankers, Destroy the ZOG NOW!!!