Abenomics: Japan's economic revolution will rock our world. BOJ blows big bubble say experts.; Japanese people have a bubble every 50 years. Once Japan does have a bubble they do it really big.
Tweet Topic Started: 22 Jan 2013, 12:01 PM (13,765 Views)
Catweasel say will there be a piddle on pants and on floor under Australian banker if a interest rate differential the close between Australia and a Japan?
During good the times, Australia the bank love fund & carry trade from japanese housewife and belgian dentist.
Who will be the next if differential close?
I thought both the USD and EUR were in a race to debase? USD was a strong carry currency before the GFC,and if the Fed is trapped the way I think they are, we could have USD ZIRP for decades, which will probably make it a suitable candidate.
I don't think anyone will be touching the EUR until only the ECB can issue EUR denominated bonds, and then the ECB can debase the EUR as much as they want, so they will most likely go to ZIRP as well.
I think CHF is a non-starter, not enough liquidity.
The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary. H. L. Mencken
Andrew you can't have 2% inflation with the 10Y yield at less than 1%. The only reason any market participant buys a 10Y JGB at 1% yield is because what they lose on yield they make up on price deflation. i.e. purchasing power increases. If you turn that around and get 2% inflation, the bond market will go bidless. No one wants to pay the Japanese Government 2% a year to maintain their stupid policies.
Dammit, how do I embed videos from CNBC here?
Thanks Miles, sometimes I think I am talking to myself. The only way this can be achieved is if the BOJ buys each and every bond. Direct unsterilised money printing.
Years of deflation might seem like a nice distant dream in the future for Japan.
Enjoy The Ride!
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
Thanks Miles, sometimes I think I am talking to myself. The only way this can be achieved is if the BOJ buys each and every bond. Direct unsterilised money printing.
Years of deflation might seem like a nice distant dream in the future for Japan.
The Keiretsu are already buying foreign assets and getting out of Yen as fast as they can before this lunacy is introduced.
How long will the Japanese public bend over and take it while the Shogun and the Daimyo destroy their life savings to prop up their antiquated export economy? When will they say enough is enough and have an Asian spring?
The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary. H. L. Mencken
The Keiretsu are already buying foreign assets and getting out of Yen as fast as they can before this lunacy is introduced.
How long will the Japanese public bend over and take it while the Shogun and the Daimyo destroy their life savings to prop up their antiquated export economy? When will they say enough is enough and have an Asian spring?
They will give up when it breaks!
Enjoy The Ride!
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
All they want to do is create a small amount of inflation to end decades of deflation.
They've already been creating "a small amount of inflation" for a long time. Explicitly that is the Milton Friedman doctrine and it's been "law" since Basel one. They target a small amount of annual inflation as measured by the CPI.....2 to 3%. The actual monetary inflation is really double that at 4 to 6% pa.
But there is a problem with the small inflationary doctrine. In fact it eventually leads to deflation because typically the market will overshoot and create an excessive amount of credit. Which becomes a dollar short and leads to a credit crunch. They could up the ante by the increasing the small amount of inflation, but another bigger credit bubble followed by a bigger credit crunch, followed again by the perception that the cure is an even higher rate of inflation.
It's been proven not to work in the 1970's, it becomes a vicious cycle................been there and done that!
The next trick of our glorious banks will be to charge us a fee for using net bank!!! You are no longer customer, you are property!!!
He took Japan off gold in December 1931. He ran ‘‘Keynesian’’ deficits... He compelled the Bank of Japan (BoJ) to monetise debt until the economy was back on its feet... Japan later lurched into hyperinflation.
It always ends the same way, hyperinflation, then grinding deflation. It will be no different this time if we run up huge government debts. They are in the US, not here yet. We might just collapse into deflation. Eiter way, the debts have to written off. Especially the 1.47 Trillion in housing debt the Australian public holds close to its chest.
Negative gearing is a form of leveraged speculation in which a speculator borrows money to buy an asset, but the income generated by that asset does not cover the interest on the loan
A negative gearing strategy can only make a profit if the asset rises so much in price that the capital gain is more than the sum of the ongoing losses over the life of the speculation. http://en.wikipedia.org/wiki/Negative_gearing
Andrew I expect South Korea and to a lesser extent Taiwan and China to be watching very closely. I dont think they will allow the Yen a free ride down.
Currency wars are starting to heat up the next year will be interesting.
It has been tried before, it did not work.
$15 milk in Japan may not make everyone feel richer.
I came across this comment in the blogosphere today, worth a chuckle.
"I fail to see why this is a problem. Much like in the US, when the debt coupon needs to be paid, just print more and raise the debt ceiling. To put it another way, if your home backed up with sewage and it started rising to the point where it approached the ceiling, would you deal with it, or raise the ceiling?
Any rational person would just simply raise the ceiling. Dealing with the shit is just too difficult."
ETR
You go from one extreme to another. China does not have low inflation. Does Korea?
There does appear to be deflation in Japan.
Miles McCarthy
22 Jan 2013, 07:08 PM
Andrew you can't have 2% inflation with the 10Y yield at less than 1%. The only reason any market participant buys a 10Y JGB at 1% yield is because what they lose on yield they make up on price deflation. i.e. purchasing power increases. If you turn that around and get 2% inflation, the bond market will go bidless. No one wants to pay the Japanese Government 2% a year to maintain their stupid policies.
Dammit, how do I embed videos from CNBC here?
The idea is to create some inflation and turn around the long standing deflation psychology. A large amount of the government debt is held by japanese who get a low income from that debt. An increase in their income is not a bad thing if you want to create inflation.
Finland has had negative yields and there seem seems to be inflation in Finland and the wider Euro area. If investors think the governments policies are good for buisiness, or the situation elsewhere is so uninspiring, you could have low yields and inflation.
You go from one extreme to another. China does not have low inflation. Does Korea?
There does appear to be deflation in Japan.
Andrew, I should probably explain myself more clearly. Lets say there is a worldwide market for 100 new cars next year. Abe and the BOJ are telling the market they are going to print Yen and devalue to create inflation. The lower Yen will make Toyota cars cheaper abroad, hopefully increasing their market share at the expense of its Korean competitors eg Hyundai. This is known as a beggar thy neighbour policy. The Koreans will not be happy losing a competitive advantage and will be forced to join the game of currency devaluation.
Can you see where this leads us?
Some research will reveal it was the adoption of these types of policies that led the world into the 1930's great depression.
Andrew Judd
22 Jan 2013, 10:40 PM
An increase in their income is not a bad thing if you want to create inflation.
Andrew, this thesis is untenable.
At 2% JGB bond yields. The ENTIRE Japanese taxation reciepts would only cover the interest bill on the current Government debt. Every Yen of Governmnet expenditure would have to come from direct bond issue.
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
Andrew, I should probably explain myself more clearly. Lets say there is a worldwide market for 100 new cars next year. Abe and the BOJ are telling the market they are going to print Yen and devalue to create inflation. The lower Yen will make Toyota cars cheaper abroad, hopefully increasing their market share at the expense of its Korean competitors eg Hyundai. This is known as a beggar thy neighbour policy. The Koreans will not be happy losing a competitive advantage and will be forced to join the game of currency devaluation.
Can you see where this leads us?
Some research will reveal it was the adoption of these types of policies that led the world into the 1930's great depression. Andrew, this thesis is untenable.
At 2% JGB bond yields. The ENTIRE Japanese taxation reciepts would only cover the interest bill on the current Government debt. Every Yen of Governmnet expenditure would have to come from direct bond issue.
Rock and a Hard place?
The issue will not be the so called printing but rather how much the Japanese government increases spending.
QE is not particularly inflationary.
What is required is a change in the psychology of Japanese who prefer to invest in Government debt rather than spend money or invest in other things.
If Japan succeeds in creating a small amount of inflation why is Korea going to suddenly rush out and create more inflation than they already have?
You appear to be in denial that the Japanese appear to have deflation and wish to change that.
The issue will not be the so called printing but rather how much the Japanese government increases spending.
QE is not particularly inflationary.
What is required is a change in the psychology of Japanese who prefer to invest in Government debt rather than spend money or invest in other things.
If Japan succeeds in creating a small amount of inflation why is Korea going to suddenly rush out and create more inflation than they already have?
You appear to be in denial that the Japanese appear to have deflation and wish to change that.
Andrew the Japanese wish to create inflation and economic growth at the expense of it's neighbours. Korea, Taiwan and China will not have their markets eroded by yen devaluation, they will participate in the currency war.
We are not talking about QE here we are talking about deficit spending with unsterilised bond purchases by the BOJ
But,you have stumbled onto the real problem.
Quote:
What is required is a change in the psychology of Japanese who prefer to invest in Government debt rather than spend money or invest in other things.
Would you feel confident investing in a country where 30 years of Government and Central Bank intervention have resulted in one recession after another?
The average Japanese saver is only concerned on the return of their investment, not the return on their investment. The cure for this is a real functioning market. An environment where Government and their instruments are not the market, but the fundamentals of risk and return are present.
How can a rational human being take a position in any market or invest capital, when they are aware of the risks of Govenment policy changing course on a daily basis?
Enjoy The Ride!
The case for individual freedom rests chiefly on the recognition of the inevitable and universal ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depend. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. Humiliating to human pride as it may be, we must recognize that the advance and even the preservation of civilization are dependent upon a maximum of opportunity for accidents to happen.” ― Friedrich A. von Hayek
"I, on the other hand, am a fully rounded human being with a degree from the university of life, a diploma from the school of hard knocks, and three gold stars from the kindergarten of getting the shit kicked out of me." Blackadder.
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