Japan : It's Not A Bet If You Can't Win
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Detroit Publishing Co. Revels of Japan teahouse 1904 "Dreamland Park, Air Ship Building, Coney Island" The reactions to the $314 billion, 7.
[See the full post at: Japan : It's Not A Bet If You Can't Win]I don’t see interest rates going up in Japan, the USA, or the EU. Economies would suffer greatly.
But it means The Automatic Earth is spot on. The central banks will keep the stimulative policies in place until some exogenous factor (oil) forces their hand. Then, the interest rates stay low because the demand of money plummets along with the supply. Deflation really takes hold; cash is king; interest rates remain at the floor; and any healthy banks scoop up assets at pennies on the dollar.
Lands Of The Setting Suns https://chartistfriendfrompittsburgh.blogspot.com/2013/05/lands-of-setting-suns.html
Industrialization does not pay unless you make a nice EUnion and indebt everyone else in it into buying your products (mostly carrzzzz). Even then it does not pay, it just appears to do so for a while, until the exported insolvency hits the fan.
Considering the level of debt and the inability to grow more than 39% of the food they eat, Japan can be considered (radio)actively extinct. They should not even try anything anymore.“no central bank in the world controls the velocity of money” indeed https://research.stlouisfed.org/fredgraph.png?g=iUD
Because if you’re Japanese, spending what you have left in wealth is the last thing you want to do today AND tomorrow after 15-20 years of deflation and your falling wages under huge pressure. How is that not obvious?
Probably a correct assumption, but not a given in my view.
Perceptions based on “Confidence Only”, can change quickly and decisively. Who was it that said Confidence is Suspicion sleeping?
It could be possible that a government hell bent on creating inflation and destroying the purchasing power of it’s currency could start enough people to lose confidence and go on a spending borrowing binge to escape inflation’s ravages. This type of activity has a way of spreading quickly.
The yen has fallen considerably in value against the dollar recently, about 20% in a very short period of time which is inflationary in my book. Japan’s problems however are so serious; and as you say sir, “Sell to Whom” that it is most likely and exercise in futility.
Hi Folks,
Its all been tried before anyway, as Mizuho’s Securities chief economist simply explains.
He states they need 6% pay rises – average forecasts are for 1.8-1.9% – i.e. to get real money into the hands of people so they can spend it. Instead as energy prices rise as the Yen falls, people will end up paying more for energy and a whole load of other things, thus having the exact opposite effect on the real economy by drawing even more money out of the discretionary spend and into the essential only – if they can even afford those items, thus actually increasing deflation. Thus in the short term people will end up putting what little cash they have left into the energy price increase due to currency devaluation. Way to go Abe! :woohoo:
L,
Sid.Nothing has changed until interest rates rise. When they do rise everything will change. The bond bull is 31 years old. A bond bull market is the ultimate tailwind for the financial world since it means the value of all existing paper is rising so it can be sold at a profit or marked to market as a gain.
The belief that central banks control interest rates is nearly universal. They effect them for sure but that isn’t the same as control. The loss of belief in their control would be the largest and worst loss of faith possible for the system.
One can see the last few weeks a hint that the long long overdue turn in Treasuries may be upon us. I am not saying the turn is here but it could be and identifying that trend is the key to ID’ing the whole big enchilada.
HI Illarghi,
When Abe – and the rest of the world – find out that the Bank of Japan does not really set interest rates, which happens when those rates rise beyond what bank and government want, the cost to Japan of servicing its debt can quickly grow beyond its grasp. Even before Abenomics that debt was second to none in the developed world; if and when JGB yields rise and values plummet, the squeeze can have only a further deflationary influence on the economy (and suffocate the government). The recent rise from 0.32% to nearly 1% in 10-year JGB is merely a first sign on the wall (and is temporarily manageable because rates are extremely low). Another near tripling could see that same wall crumble to pieces. Even a doubling would shake its very foundations.
Even if they get what they want – interest rates at a paltry 2.2% will take away all gov’t income:
From Things That Make You Go Hmmm… article on “Bizarro World” where everything is backwards:
Must be the Esenapaj government version of Ukuppes… :dry:
L,
Sid.Hi Illarghi,
As was suggested earlier (comment above):
The Painful Side Of Japan’s “Growth Strategy”
Submitted by Tyler Durden on 06/10/2013 13:43 -0400“Following last night’s ‘surprising’ upward GDP revisions, Japan’s trade balance plunged to near-record deficit levels (but that didn’t matter) and while China’s trade data is questionable at best (and now proven ‘false’), Japan is facing a much more considerable worry at home. Abenomics’ goal to reduce the value of the JPY to improve competitiveness and spur a renaissance has had a rather nasty side-effect for all the Japanese people who eat, drive, or in any way use energy. The cost of Japan’s crude basket has risen 35% in the last six months and is now at its highest for the domestic energy user since 2008 (which sparked the last collapse into deflation). As Bloomberg notes in this brief clip, this surge is not related to demand or the price of oil, but to the devaluation of the Japanese currency and leaves both the refiner crushed on margins and the consumer more cash-strapped.”
(bold in orig)
…”more cash strapped” = more deflation.
What bit of TINWO (There Is No Way Out) do they not understand? Karmic payback for the TINA (There Is No Alternative) days?… :dry:
L,
Sid.
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