The idea that government can create prosperity out of thin air by either printing money or by taking money from one person to give to another is totally preposterous. Previous generations knew this and every time they tried it it ended in disaster. But this is what the world is banking on and since everyone now thinks that government is somehow God, they have a faith in government that it does not deserve. Japan will default on its government obligations and so will both the USA and Europe. Folks will wake up to that once Japan does and there will be no credit allowed back to the dumbass governments.....
Japan is making the same mistakes we’re making … or we’re making the same mistakes they’ve already made – it’s hard to tell.In the current world, its a race to the bottom. Governments are all debasing their currencies at the same time and what it will do is make their own people much much poorer. But along with that, we will also have a coarsening of societies and we will also risk the rise of strongmen and other autocratic responses. And its not beyond the USA to avoid these social and political problems.
Either way, the bottom line is pretty simple: You give me a trillion yen and I’ll give you a good time, too.
In order for Abenomics to work, four things have to happen:
Japanese banks cannot hoard money the way big banks have in the US. They have simply got to keep it moving right through to Japanese citizens and small local businesses.
Japanese bond market participants have to be willing to maintain bidding as the Bank of Japan conducts “market operations,” which is Fed-speak for interfering with normal pricing dynamics in an effort to maintain stability. If bidders walk away, the bond market will fail and the government will have to contend with offshore derivatives traders who are already lining up to play the same games they did in Italy, Spain, Greece, and the balance of the EU.
Japanese consumers have to engage. If wages fail to increase, living standards will decline and Abe will be up a creek without a paddle – and yes, I mean THAT creek.
The international banking community has to allow Japan to debase its currency without punitive repercussions. So far the G20 has acquiesced, but their tacit approval doesn’t really mean much. They have no choice but to go along with Japan’s moves. Kuroda, who is Bernanke’s equivalent at the Bank of Japan and Abe’s sidekick, has made it clear he is fully committed to the program, no matter what the West thinks.
Longer-term, Abenomics is a recipe for disaster – have no illusions about that. Japan, as John Mauldin likes to say, is a bug in search of a windshield. No nation in the history of mankind has ever bailed itself out on anything more than a short-term basis by pursuing a course like Japan’s.
Guest Post: Is Abenomics Going To Put Japan Back On The Map? | Zero Hedge