Exit QE, enter QQE! - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 30 September 2015
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- By Bill Bonner

Bill Bonner
London, England

Dear Diary,

We interrupt our series on what to do if you have no money....to bring you an update on those who are losing it.

What was the best place for your money so far in 2015? Cash! Compared to cash, almost everything is down.

We are headed for the worst quarter since 2011, says the Financial Times' lead story today. A total of $10 trillion has been cut from the world's wealth.

What? Where did that money go? The old timers say it went to 'money heaven.' We're not so sure. But we stop. We stare. We look at it as we would at a corpse. What happened to its life force? Where did it go? Why is it no longer there?

We have no answer. But looking at a stock market sell-off is like standing over an open coffin... We are in awe at the power of the gods to take as well as to give. They ask no one's permission. They follow their own play-book, which they never reveal to mortals. And they are as much a law unto themselves as the NSA.

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But what's $10 trillion? And what's $10 that never actually existed anyway? Easy come, easy go, right?

Well...yes...and no. It's usually a pleasure to welcome a baby, but a funeral can be painful. And every one of those dollars - now headed for heaven or hell - will be missed by someone.

Yesterday, US stocks rose...with the Dow up 154 points. That left the stock market overvalued by about 8,000 points. At least, that is the assessment of billionaire and investment legend Carl Icahn. The price/earnings multiple is about 22, he says, and "half of that is bulls**t."

'Money talks and bulls**t walks,' is the old expression. And sometimes the bulls**t walks out the door...taking the money with it. That is what has been happening in this quarter.

And not only in the US. The biggest losses have been suffered abroad. Japan, for example, deserves special notice. As you might remember, our 'Trade of the Decade' was to sell Japanese bonds and buy Japanese equities. After a quarter century of bear market, we figured Japanese investors were sure to catch a break. And Japanese bonds had been so overbought for so long, the market in JGBs was bound to run into trouble.

This trade looked pretty good a few weeks ago. Japanese stocks were up almost 20% this year alone. That was largely thanks to Shinzo Abe's 'Three Arrow' plan to reduce the value of the yen. But like all macro engineering by public officials, the plan soon revealed itself as just more bulls**t.

Instead of stimulating the economy, Abe's first two arrows - monetary and fiscal easing - seemed to strike vital organs, draining away what little life was left. So disappointing were the results that Abe forgot his third arrow - structural reform - and instead picked up a whole new quiver with the usual assortment of crooked and twisted policy claptrap.

But the BS walked out the door anyway, with Japanese stocks giving up all this year's gains. Japan's economy is now shrinking. Exports are collapsing at a 16% annual rate. And deflation came back to life the day after Abe proclaimed it dead.

And now cometh Etsuro Honda, described as an "architect" of the Abenomics plan. He says that it might be premature to say Japan is in recession. Instead, its economy is "static." In yesterday's interview with the Financial Times, he took no blame for the slowdown, even though he, as much as any living human being, is clearly responsible for it. Instead, he proposes to go Full Retard, with even more imbecilic policies.

This, we fear, is not just a freaky sideshow. This is more like coming attractions. Japan has led the world for the last three decades, first with an unsustainable bubble economy in the '80s...then with a meltdown, followed by a long on-again, off again recession. It tried every trick in the book to revive the economy - except for the one that would have worked. It borrowed and spent (as a percentage of the economy) more than any nation had ever had. And it invented ZIRP and QE as policy tools.

But now it's become "urgent," says Honda, to do more.

Hasn't he done enough already, you might ask. But no...he now proposes QQE...for qualitative and quantitative easing. What grotesquerie has he come up with now? Our mouth hangs open. What is this strange beast slouching towards the Eccles Building [US Fed headquarters]...waiting to be born?

The whole idea of 'QE' - quantitative easing - was to increase the quantity of money in the system so as to DECREASE the quality of each unit. That is, it was expressly meant to lower the value of yen so that consumers would want to get rid of their money faster. QQE makes no sense...even in the perverse terms of modern central bank meddling.

But wait. There's more. Honda says it will be accompanied by a "supplementary budget, focusing on the real income shortage of mid and low-income households."

Ah ha...that's the monster that is coming to towns and villages near you. Call it 'QE for the people.'' Call it 'money from helicopters.' Call it 'insane.' But it won't be unpopular. Who will protest when the feds begin handing our money to 'mid and low-income households?'

We wait. We watch. We wonder how the Japanese will attempt to bring back to life the economy they have worked so hard to kill. And now, all over the world, central planners, bankers, and politicians are watching too. 'Where goest the Bank of Japan, there too I shall go,' they tell themselves.

Stay tuned...

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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