In April 2013, Japan announced a QE program of $1.4 trillion, an amount equal to roughly 25% of the Japanese GDP. To put this into perspective, the US’s QE1, QE 2, QE 3, and QE 4 programs which were spaced out over four years are an amount equal to roughly 16% of US GDP.
Japan announced a larger program relative to its economy all at once. The idea was that by throwing around a big enough amount of money, Japan’s economy would finally waken from its 20-year slumber and take off.
This effort has been an abysmal failure. Japan’s second quarter GDP grew at just 0.6% quarter over quarter, registering the single biggest growth MISS in a year (economists were expecting 0.9% which, by the way had already been revised lower).
Put in plain terms, Japan announced the single largest QE effort in history, and not only did its economic growth projections have to be lowered, but it is failing to even meet these lowered growth projections.
The “QE generates economic growth” story is officially dead. This will have severe repercussions throughout the financial system.
Indeed, it is not coincidence that the Fed began talk of tapering QE shortly after Japan announces its own massive program. And it is not coincidence that the Fed began to speed up the “taper QE” timetable as the epic failure of Japan’s QE efforts become obvious to everyone.
The Fed now clearly realizes that QE no longer impacts the economy in any meaningful way. It also realizes that it has created yet another massive stock market bubble, arguably one that is even worse than that of 2007/2008.
The writing is clearly on the wall. We have numerous proprietary metrics that are screaming “collapse” as I write this. The likelihood of a full-scale market Crash similar to 1987 occurring in the coming months has increased dramatically.
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Best Regards
Graham Summers