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Friday, November 21, 2014

Japan Is Dying And We Still Don't Get It?!

What is it with us? Don’t we WANT to understand? Japan announced on Monday that its economy is in hopeless trouble and back in recession (as if it was ever out). And what do we see? ‘Experts’ and reporters clamoring for more stimulus. But if Japan has shown us anything over the past years, and you’re free to pick any number between 2 and 20 years, it’s that the QE-based kind of stimulus doesn’t work. Not for the real economy, that is.

The land of the setting sun has during that time thrown so much stimulus into its financial system that Krugman-esque calls for even more of the same look even more ludicrous today than they did all along. Abenomics is a depressing failure, just as we knew it would be since it started almost two years ago. It’s not complicated, and it never was.

Japan’s stimulus has achieved the following: banks get to pretend they’re healthy and stocks rise to heights that are fundamentally disconnected from underlying real values. On the flipside of that, citizens are being increasingly squeezed and ‘decide’ not to spend (not much of a decision if you have nothing to spend). Since Japan’s ‘consumer’ spending makes up about 60% of GDP, things can only possibly get worse as time passes. If ‘consumers’ don’t spend, deflation is the inevitable result – and that has nothing to do with the much discussed sales tax, it’s been going on for decades -.

Therefore, the sole thing QE stimulus has achieved is a wealth transfer from poorer to rich. And that’s not only the case in Japan. Mario Draghi yesterday hinted – again – at all the stuff he could start buying next year, including sovereign bonds, even though that would violate EU law. And whether or not Germany will let him in the end, the fact that he keeps the option alive even if only in theory, tells us plenty about the mindset at the ECB.

That is, it’s the same as in Japan. And doing the same can only lead to the same results. A poorer population, a richer toplayer and an economy that continues to shrink, which will and must lead to the same deflationary trend. The idea that an economy can be rescued by pushing public funds into its finance system and stock markets has been forever thrown out by Japan’s experiences.

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4 comments:

  1. You guys just don't get it, do you? This article pops up, and the SAME for the next country, and the next for the U.S.

    Solution? Print more money! Print twice the deficit, and half the deficit is cut in half! See? Isn't that sweet?

    Well, no, because nowhere are twice as many dollars, so your measly $15.00 an hour wage is now a $7.50 an hour job. No one doubled your wages to offset the inflation.

    So, to put it bluntly, you are screwed, and the 5 million illegal aliens who just got amnesty are not screwed.

    Are you ready yet?

    ReplyDelete
  2. Good. Let Japan go away... no more anime and weird fetish porn. Not losing much.

    ReplyDelete
  3. At first glance I thought this was about Fukishima and the radiation.What about that anyway? Did it simply go away,or did it pale so in comparison to the other news stories that it currently sits on a back burner? According to what we heard 2 years ago we should all be gravely ill by now.

    ReplyDelete
  4. "no more anime and weird fetish porn. Not losing much."

    Whoa! Speak for yourself!

    ReplyDelete

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