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  • John Mauldin On The Yen: A Philosphical Disagreement [View article]
    If you have come across Austrians before then you have had time to look for holes in their logic. I guess you did not find any?
    Dec 10, 2014. 10:57 AM | 1 Like Like |Link to Comment
  • John Mauldin On The Yen: A Philosphical Disagreement [View article]
    The author does not understand that high inflation is a positive feedback loop or death spiral. The more people get out of bonds, the more the central bank has to make new Yen and buy bonds. But the more it makes new Yen and buys bonds, the worse it is for anyone else to hold those bonds, so even more sell. This is a death spiral. It ends in a flood of Yen that are worth far less than when we started.

    He thinks they can stop printing Yen anytime they want but it is not true. Only the central bank is buying bonds and the government is spending twice what it gets in taxes and lots of bonds coming due, so the central bank must keep buying or the government defaults. Governments never default on debt in currencies they can print, they print. Japan must and will keep printing.

    They have painted themselves into a corner and now there is no way out. The time of good choices has past.

    http://bit.ly/1tDYaE6
    http://bit.ly/15SicSd
    Dec 10, 2014. 05:27 AM | 3 Likes Like |Link to Comment
  • Krugman's Missing Model [View article]
    And it now looks like they may get 6 years of Abenomics, if his snap election works out well for him.
    Dec 8, 2014. 02:09 PM | Likes Like |Link to Comment
  • Why The JGB Market Ignored Moody's Downgrade [View article]
    For what is going on now in Japan, CMMT is far better than MMT. As the central bank buys bonds with new money MMT says, "it is just an asset swap". But CMMT can explain why the Yen is plunging.

    http://bit.ly/1s3xCsE
    Dec 5, 2014. 09:09 PM | Likes Like |Link to Comment
  • Why The JGB Market Ignored Moody's Downgrade [View article]
    I said *if* they print fast enough they can hold interest rates down. I did not say they always will print fast enough, Japan is now. Nobody else is buying JGBs but the central bank with new Yen.

    If the central bank stops printing and interest rates shoot up, then the government is clearly broke (interest more than taxes) and nobody will buy their bonds. The government needs someone to buy their bonds as they are spending twice what they get in taxes and there are lots of bonds coming due that they have to pay with money from selling new bonds. The central bank will keep printing and buying government bonds, and they will get hyperinflation. There is no way out at this point except to cut the government budget in half which is not even close to possible, given Krugman talking to Abe in a Limo and a general population that fully believes in stimulus.
    Dec 5, 2014. 08:49 PM | Likes Like |Link to Comment
  • Why The JGB Market Ignored Moody's Downgrade [View article]
    The death spiral is extraordinary. Usually leads to the death of a currency.

    I agree that there is nothing extraordinary about the current USD/Yen ratio.
    Dec 4, 2014. 10:18 AM | Likes Like |Link to Comment
  • Why The JGB Market Ignored Moody's Downgrade [View article]
    If the central bank prints money fast enough and buys bonds it can always keep interest rates down. This is what Japan is doing.
    Dec 4, 2014. 10:01 AM | Likes Like |Link to Comment
  • Why The JGB Market Ignored Moody's Downgrade [View article]
    The real reason Moody's had no impact is that the only buyer is the central bank.
    Dec 4, 2014. 09:06 AM | Likes Like |Link to Comment
  • Why The JGB Market Ignored Moody's Downgrade [View article]
    When it comes to inflation, MMT is broken. So I corrected it making CMMT. With this it is very easy to understand inflation:

    http://seekingalpha.co...
    Dec 4, 2014. 09:01 AM | Likes Like |Link to Comment
  • Why The JGB Market Ignored Moody's Downgrade [View article]
    For the last 3 months a typical week is the Yen loses 1% relative to the dollar. The Japanese base money supply is going up at about the same rate. From Nov 10 to 20 it went up 1.8% and also from Nov 20 to Nov 30 it went up 1.8%.

    The 10 year JGB paying 0.4% per year means you lose about equal to 2.5 years of interest every week. This is a crazy bad investment so of course people, banks, companies, and retirement funds are fleeing JGBs. You can see this because the central bank is buying them much more than enough to fund the deficit.

    You think that if the central bank lets interest rates go up then people will buy JGBs again but you are wrong. The problem is that the higher the interest rate the more broke the government looks. If interest rates go up a few percent it would take all of their taxes to pay the interest on the debt. Nobody will buy bonds in such a government, nor at any higher interest rate where they are much worse off.

    They key dynamic at this point is that the more the central bank makes money and buys bonds, the worse those bonds are as an investment because the currency will go down, so the less people want to hold JGBs. At the same time, the fewer people that hold JGBs the more the central bank must make new Yen and buy up JGBs. This is a death spiral. The only way out is to cut the government spending in half, which will not happen till after the hyperinflation has finished.

    http://bit.ly/1tDYaE6
    Dec 4, 2014. 08:56 AM | 1 Like Like |Link to Comment
  • How We Know High Inflation Is Coming [View article]
    There is some inflation, and probably the government understates it a bit, but so far it is very small compared to what is coming.
    Nov 20, 2014. 01:44 AM | Likes Like |Link to Comment
  • Throwing In The Towel On Japan [View article]
    If you understand hyperinflation, you can understand Japan. Hyperinflation is a positive feedback loop where the more the central bank buys government bonds, the less anyone else wants to buy or hold them. Also, the less people buy/hold bonds, the more the central bank has to buy and hold so the government has cash to operate. This spirals out of control with lots of new money being created. The new money eventually results in inflation, which results in higher velocity of money, which contributes to inflation. Hyperinflation has a lot in common with many interesting positive feedback loops in nature:

    http://bit.ly/1tDYaE6
    Nov 13, 2014. 04:35 AM | Likes Like |Link to Comment
  • Who Really Thinks That Japan Is Argentina? [View article]
    I really think Japan will get hyperinflation. What happens is a death spiral, or positive feedback loop. The more the central bank makes new money and buys bonds, the worse it is to hold bonds, so more people get out. But the more people that get out the more money the central bank must make to buy bonds, since otherwise the government would fail and the central bank with it. This death spiral ends with all the debt being monetized and nobody but the central bank buying government debt from then on. The flood of new money and the increased velocity as inflation picks up result in hyperinflation. I think Japan has started this death spiral. If so, people will want out of JGBs faster and faster and the supply of Yen will be going up fast even as the demand goes down. The price of Yen will keep falling.

    Look at this and also follow the link at the end:
    http://bit.ly/1tDYaE6
    Nov 6, 2014. 09:53 PM | 1 Like Like |Link to Comment
  • Deflation Leads To Hyperinflation [View article]
    I have other explanations of hyperinflation that I like better:

    http://bit.ly/1tDYaE6
    Oct 29, 2014. 07:06 PM | Likes Like |Link to Comment
  • No, Higher Velocity Will Not Necessarily Mean Higher Inflation [View article]
    P = M * V / GDP

    You don't get a statistical relationship between P and V, but you get a great one between P and M*V. We already have M way up so if V also goes up then M*V is way up and P must go way up. So given out current reality of M way up, it must be that when V goes up prices will go way up.

    The equation of exchange works no matter which definition of money you use. The moneyness things not included in by the definition you use just help move the "real money" around faster, contributing to the velocity of money.
    Oct 22, 2014. 05:22 AM | Likes Like |Link to Comment
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