Yes, it is easy to pity the Japanese too. Most of their wounds may be self-inflicted. Still, they live in tiny houses...with a standard of living the rest of the developed world holds in contempt. And they've suffered two and a half decades of on-again, off again deflation. They've tried everything to get out of this slump...stimulus deficits, zero interest rates, quantitative easing. They've tried everything...except the one thing that would work! Not surprisingly, things have gotten worse. And just in September, real household income was falling at a 6% rate. Between 2013 and 2015 it's expected to decline by almost 10%.
And now the Japanese are desperate.
That is where the gratitude comes in. Americans and Europeans should thank them for having shown us what not to do...for proving, if it needed proving, that you can't fight a debt crisis with more credit. More importantly, they're showing what happens to Bismarck's social welfare economy when you run out of young people, growth, and credit.
Now, it's time to double our gratitude. Because now the Japanese are showing us that even a world class economy can do something worthy of a banana republic. Already, for every dollar the Japanese government collects in revenue, it spends 40 cents more. Total debt - government and private - is near the highest in the world, at about 6 times GDP. They're running out of time...and money. The Bank of Japan is financing the government; it buys 70% of Japanese government issued debt. Last week, it announced that it would buy 85%.
In other words, Japan is going to show us that you don't have to be a Third World kleptocracy - such as Zimbabwe -- to undertake extraordinary and disastrous policies.
Thank you, Japan! Let us say a prayer for the Japanese and learn from their example!
Yes, just 48 hours after the end of QE in the US, Japanese officials announced the most absurdly audacious QE plan in history - with $750 billion in new money-printing per year. Adjusted to the relative size of the Japanese economy, that would be about $3 trillion annual QE in America. Anticipating a flood of new cash, stocks rose around the world.
Coincidence? Lucky timing for Yellen & Co? It is almost as if the central bankers got together in advance and planned it that way. QE stops in the US...while the Japanese put it into hyper-drive. Stocks rise in both countries. All is well.
The Nikkei Dow, faithfully recording the hopes and dreams of Japanese investors leap 5% on the news. The Dow followed suit.
Foreign investors, no dopes, figured out that there was money to be made in a revival of the old Japanese 'carry trade.' They can borrow in Japan too - at some of the lowest interest rates ever recorded on the planet. Then, what to do with the money? Hey, why not carry it over to the only economy that is growing at a decent rate - the US?
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.