QE and Japan

Jim H
By Jim H on Fri, Jul 11, 2014 - 2:14pm

Excellent overview of what is going on in the most indebted of nations - Japan.  One paragraph in particular caught my eye;


What is striking about Japan’s quantitative easing scheme is its size. In April 2013, the Bank of Japan announced a programme of $1.4trn. To give that some context, this is not only equivalent to a quarter of Japan’s annual GDP, but also sufficient to buy every single thing produced in the whole of Australia for a year. It is a staggering amount, and not even the maddest Keynesian could claim that the programme was insufficient to generate growth under their terms. The result? Two quarters of growth followed by a sharp downturn, the cost of living at a five year high and record trade deficits every month since January last year. Not only is quantitative easing not working in Japan, but the scale of the Japanese experiment is such that both market and consumer is starting to realise that it won’t work anywhere at all.

It is recognition like this that marks turning points... is the market really starting to realize that QE, no matter how big, is a failure at igniting growth?  I believe the answer is yes, and that the bond market is telling us this.  Prepare for your money to be stolen from you by your own Gov't; 

To cut to the chase, it didn’t take too long before LTCM imploded. I guess the Nobel “Dream Team” had not figure out how to turn lead into gold after all. LTCM was bailed out by the Fed plus several of the big Wall Street banks who also faced collapse if LTCM was allowed to incinerate to the ground. These banks had all plugged LTCM with the derivatives trades that blew up LTCM. I was at one of them, Bankers Trust, which was one of the guiltiest perpetrators and which had been found guilty several years of earlier of ripping off Proctor and Gamble with derivatives.  Bankers Trust is now part of Deutsche Bank, one of the two most risky banks in the world (JP Morgan is the other).

Back then it was the Wall Street banks who were required to put up “equity” to keep their businesses alive. In 2008 it was the Taxpayers and the “equity” put up  by Taxpayers was 8x greater. Only that equity went into the pockets of the people running the banks.

Don’t let your “equity” sitting mutual funds and money market funds get taken from you in the next stage of bailouts, which will be the nefarious “bail-ins.” “Bail-in” means your money that will taken from your pocket and given to the entities who face collapse.



davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5740
BOJ buying spree

This shows the two printing operations of our two favorite central banks, the BOJ, and the Fed.  BOJ is in black, and you can see by the steepness of the curve, it's printing at a much higher rate than the Fed.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391

Thank you Dave.. nice chart.  Yes, Japan is definitely winning (in the Charlie Sheen vernacular) the race for most robust QE.  I think that the author's point is a good one.. if this is not enough stimulus (Paul Krugman...) then what is?  

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