Japan Creates A Negative Feedback Loop In JGBs And Yen [View article]
I 100% agree with you. What I find funny is that as I watch more and more of the MMT guys' videos, it strikes me as odd that guys like Mike Norman and Peter Schiff are actually arguing the exact same point. Schiff is currency negative. He thinks central banks will try and print their way out of problems. Isn't that exactly what the thesis is for MMT? Given that thesis, shouldn't the MMT guys be currency negative as well? No bond crisis because governments can print. They seem to be arguing the exact same point but with different conclusions?
Japan Creates A Negative Feedback Loop In JGBs And Yen [View article]
By the way, yes I am aware that the situation I wrote about would actually be defined as a "Positive Feedback Loop". I should change the title to Feedback Loop with Negative Consequences
Japan Creates A Negative Feedback Loop In JGBs And Yen [View article]
Ask any and all of the MMT crowd. I disagree with their economics but guys like Mike Norman laugh at the idea that the market controls interest rates. MMT suggests that as long as a country can produce its own currency, bonds never break and borrowing is GOOD. I think that is "unicorn and rainbow" economics and has no basis in historical fact, but good, that means there is someone out there willing to sell me puts on JGBs.
Violent swings in the Japanese government bond prices forced the Tokyo exchange to twice temporarily stop trading in them overnight. JGB prices first continued to rise sharply in wake of the new BOJ policy - the yield plunging to 0.315% - but investors rushed to take profits, and the yield then soared to 0.62%. This for a product in which a 2 basis point move makes headlines. [View news story]
Watching and trading the JGB futures last night was insane. Bid offers got about a mile wide. Was crazy trading for sure. Is this the start of something bigger? Check out ShortJapanDebt
Japanese PM Shinzo Abe is reportedly set to nominate Asian Development Bank President Haruhiko Kuroda as BOJ Governor. It's hard to think of a bigger dove. "The Bank of Japan must be prepared to do anything and everything" to achieve its 2% inflation target, he said in a January interview. Look for a big opening pop in the Nikkei, and a big opening drop in the yen. [View news story]
Abe is being lauded as a hero. Why is it heroic to attempt to create inflation when you have bond yields of less than 1%? Who does inflation hurt the most? Bondholders, fixed Income investors, retirees, and consumers should not be happy. I guess that basically covers the entire population of Japan. When did inflation become a stated policy objective rather than negative side effect of central bank activity? At some point when bonds become weak, this devaluation will become disorderly and we could easily see the yen move to 200, 300, or even 1000 to the USD. We are seeing history unfold before our eyes. Japanese citizens should be buying assets outside Japan. No wait.........they already are.
Currency Wars Over Before They Begin? [View article]
Don't forget a very important point here. Abe has set an inflation target, not a yen target. He has said "unlimited" government action. What you should be watching for is weakening of the yen but NO positive GDP numbers which is what I think may happen. What would be even worse is what you are seeing in the UK. 2.7% inflation and a REDUCTION of GDP. That is a central banker's nightmare. Abe does not know what he wishes for. The real pressure on the yen will come when the BOJ tries to defend a weakening bond market. That is what pushes the yen to 200-300 to the USD.
Central Banks Make Unintended Consequences 'Tolerable' [View article]
Back to the point of my article. What if you have 4% inflation and 10% unemployment? Keep printing? 6% inflation and 12% unemployment?
See where I am going with this? I would argue that no matter what the negative consequences are, central bankers will ALWAYS ALWAYS print more because they are at the mercy of the politicians who want to spend. That is the weakness of this economic theory.
Central Banks Make Unintended Consequences 'Tolerable' [View article]
But I would assume you have concluded that we are a long ways away from that level right?
I bring this up to point out the original thesis of my article. It is my opinion that central banks will print no matter what. When negative consequences come up, they will ignore them (or change the way they measure inflation) and carry on. Inflation? No problem. Bubbles? No problem.
I guess the fun part of the discussion would be the "how much is too much" part of the equation. I am not arrogant enough to suggest I can pinpoint that level.
I can tell you that the theory of "spend, borrow, print, QE, rinse and repeat" is being tested in Japan. It is being tested and is failing right in front of our eyes. The GDP of Japan is the same size now as it was in 1991. This fact has got to have Keynesians wringing their hands.
Central Banks Make Unintended Consequences 'Tolerable' [View article]
Lawrence,
Answer one simple question for me. It actually goes back to the subject of this article. Is it possible for central banks to print TOO MUCH money? When answering this question, consider this. If the answer is NO, then why don't we make tax rates ZERO. If government debts can be paid by QE, then why do we bother with tax revenues?
Would you agree that higher taxes slows an economy?
USD/JPY: The Short And The Medium Run [View article]
Your conclusion about energy being an important part of the trade balance is dead on. An important question to ask would be "how quickly can nuclear reactors be turned back on?" I would be interested to know that. It it true financial lunacy by Abe to weaken the yen and make Japan's energy imports more expensive. If you think about it, he is making LOTS of Japanese imports more expensive. No wait....I forgot.....inflation is the answer to Japan's problems. What a complete joke. Does anyone in Japan know there are two kinds of inflation? Does Japan really want inflation generated by endless money printing? In a ZIRP environment? No way.
I have a sneaking suspicion that Japanese policy makers will keep moving the goalposts when it comes to yen targeting. When we get to 90, then 100 is the optimal rate. When 100 comes along, clearly 110 is a more reasonable number. See where I am going here?
Try this one on for an economics history lesson. Name one country that amassed massive amounts of government debts, devalued the currency, saw an explosion in exports, grew GDP, increased tax revenue, and paid down the debt. You can look all day every day and you won't find it because it has never happened. This is an economic theory gone wrong. More spending and borrowing benefits only those trying to get reelected.
The yen's decline is the real deal, says George Soros holding court at Davos, and it's going to make for some unhappy German exporters. The euro, he says, is the outlier currency as the ECB stands alone among the major central banks in not engaging in QE. His comments hit an already weak yen, sending the dollar higher against it by 1.8% to ¥90.20. The hedged Japan equity fund (DXJ) +2.6%. [View news story]
I am interested to know why Soros says ECB stands alone not engaging in QE. When the central bank buys the bonds of governments, that is not QE? Sorry George. I respectfully disagree.
Japan Creates A Negative Feedback Loop In JGBs And Yen [View article]
Japan Creates A Negative Feedback Loop In JGBs And Yen [View article]
Japan Creates A Negative Feedback Loop In JGBs And Yen [View article]
Japan Creates A Negative Feedback Loop In JGBs And Yen [View article]
Violent swings in the Japanese government bond prices forced the Tokyo exchange to twice temporarily stop trading in them overnight. JGB prices first continued to rise sharply in wake of the new BOJ policy - the yield plunging to 0.315% - but investors rushed to take profits, and the yield then soared to 0.62%. This for a product in which a 2 basis point move makes headlines. [View news story]
Japanese PM Shinzo Abe is reportedly set to nominate Asian Development Bank President Haruhiko Kuroda as BOJ Governor. It's hard to think of a bigger dove. "The Bank of Japan must be prepared to do anything and everything" to achieve its 2% inflation target, he said in a January interview. Look for a big opening pop in the Nikkei, and a big opening drop in the yen. [View news story]
Currency Wars Over Before They Begin? [View article]
Central Banks Make Unintended Consequences 'Tolerable' [View article]
http://bit.ly/YIXksg
Central Banks Make Unintended Consequences 'Tolerable' [View article]
See where I am going with this? I would argue that no matter what the negative consequences are, central bankers will ALWAYS ALWAYS print more because they are at the mercy of the politicians who want to spend. That is the weakness of this economic theory.
Central Banks Make Unintended Consequences 'Tolerable' [View article]
Central Banks Make Unintended Consequences 'Tolerable' [View article]
I bring this up to point out the original thesis of my article. It is my opinion that central banks will print no matter what. When negative consequences come up, they will ignore them (or change the way they measure inflation) and carry on. Inflation? No problem. Bubbles? No problem.
I guess the fun part of the discussion would be the "how much is too much" part of the equation. I am not arrogant enough to suggest I can pinpoint that level.
I can tell you that the theory of "spend, borrow, print, QE, rinse and repeat" is being tested in Japan. It is being tested and is failing right in front of our eyes. The GDP of Japan is the same size now as it was in 1991. This fact has got to have Keynesians wringing their hands.
Central Banks Make Unintended Consequences 'Tolerable' [View article]
Answer one simple question for me. It actually goes back to the subject of this article. Is it possible for central banks to print TOO MUCH money? When answering this question, consider this. If the answer is NO, then why don't we make tax rates ZERO. If government debts can be paid by QE, then why do we bother with tax revenues?
Would you agree that higher taxes slows an economy?
USD/JPY: The Short And The Medium Run [View article]
Yen Falls Back [View article]
Try this one on for an economics history lesson. Name one country that amassed massive amounts of government debts, devalued the currency, saw an explosion in exports, grew GDP, increased tax revenue, and paid down the debt. You can look all day every day and you won't find it because it has never happened. This is an economic theory gone wrong. More spending and borrowing benefits only those trying to get reelected.
The yen's decline is the real deal, says George Soros holding court at Davos, and it's going to make for some unhappy German exporters. The euro, he says, is the outlier currency as the ECB stands alone among the major central banks in not engaging in QE. His comments hit an already weak yen, sending the dollar higher against it by 1.8% to ¥90.20. The hedged Japan equity fund (DXJ) +2.6%. [View news story]