Categories

Economy & Politics

Tools

  • Economy & Politics
  • Investing
  • Personal Finance
  • Related Posts


    Save Companies From Drowning In Cash
    Greece’s Predicament In One Scary Chart
    Big Brother Is Watching You Run Errands
    Mitt Romney Announces He Is Not Running For President
    Why Are Central Banks Terrified Of Debt Restructuring?
    “Everything Is Awesome” American Consumers Are The Happiest In 11 Years
    Thanks Obamacare: This Is What Americans Spent The Most Money On In Q4
    Crucial Employment Cost Index Growth Slows
    John McCain Threatens Anti-Kissinger Protesters With Arrest, Calls Them “Low-Life Scum”
    Wealthy Living: Richest County In Each State
    What Happens To Shale Boom Towns Now?
    The Oil Bust Is Hitting Business Investment, But The US Economy Is Doing Just Fine
    Russia Can’t Figure Out How To Fix Its Ailing Economy
    U.S. Economy Cools In Fourth Quarter, But Consumer Spending Shines
    Russian Central Bank Makes Surprise Interest Rate Cut


    Absolutely Not. Not Under Any Circumstances: Japan’s Coming Debt Collapse

    As expected, the Liberal Democratic Party (LDP) won a majority in the Upper House in Japan Sunday night. The market has responded with a bit of a yawn in yen and Japanese government bond (JGB) futures. Now we get to see Prime Minister Shinzo Abe fire the “third arrow” of his economic plan.

    For those who have not been following the day-to-day musings from Japan, the “Three Arrow” approach starts with a huge surge in monetary policy (check), an expansion of fiscal stimulus measures (check), and now the third arrow will be some structural changes in the Japanese business landscape (lower corporate taxes, international trade agreements and increased market-led competition in certain sectors of the economy). Let me state this clearly so there is no doubting my opinion on this matter. What is going on in Japan is an experiment. It is an experiment that has no basis in economic history.

    It is taking the experiment Federal Reserve Chairman Ben Bernanke is currently trying in the United States, and it is doing it on a much grander scale in Japan. It’s Kamikaze-QE!

    Could stock values rise in nominal terms, as they have since the announcement of destroying the yen was announced? Yes.

    http://dollarvigilante.com/sites/default/files/images/rsznikkeimay2220013bomb.jpg

    Nikkei May 22, 2013

    Could Japan see a short-term bounce in gross domestic product? You bet.

    http://dollarvigilante.com/sites/default/files/images/JapaneseGDP2.png

    Will debt to GDP levels drop as the result of Abe’s approach? Absolutely not. Not under any circumstances.

    http://dollarvigilante.com/sites/default/files/images/Debttogdp2.png

    Will the Japanese government bonds ever be repaid? Absolutely not. Not under any circumstances.

    I will be writing follow-up articles explaining in detail why I think the Abe plan is putting Japan on a collision course with a debt crisis. I will be writing follow-up opinions on the macro effects of “QE infinity” in both the U.S. and Japan. Just ask yourself a simple question: If the Krugmans of the world are right and all this government spending and bond buying is working, then are debt to GDP levels dropping globally?

    http://dollarvigilante.com/sites/default/files/images/publicdebtgdp3.png

    Absolutely not. Not under any circumstances. QE and increased government spending paints over the bad decisions of policymakers. Government spending serves one primary purpose: winning elections. When studying the "three arrow" approach of the LDP in Japan, I am reminded of a fact of economics: How do you increase GDP? You increase GDP by increasing population or increasing productivity. Does one or do all of Shinzo’s three arrows do either of those in Japan?

    Absolutely not.

    Tres Knippa

    Tres Knippa is a professional trader and broker on the floor of the Chicago Mercantile Exchange. Mr. Knippa has been trading the futures markets for over 17 years and became a member of the Chicago Mercantile Exchange in 1996. Mr. Knippa focuses his efforts on energy, stock index, and agricultural futures but holds positions in markets all over the world. In April 2001 Tres started trading proprietarily for himself and this became his primary source of income. Tres is an owner and principal of Kenai Capital Management which seeks to profit from what Tres believes is the next sovereign debt crisis. Tres has also developed many financial websites including ShortJapanDebt.com. Tres is a regular contributor on most of the major financial news networks including CNBC, Fox Business, and Bloomberg. Tres also writes for The Dollar Vigilante.

    | All posts from Tres Knippa

    Discuss this Story:

    Comment Policy: We encourage open discussion. Comments including racist statements, profanity, name calling or spam will be removed at our discretion. We use filters for spam protection. If your comment does not appear it is likely because it violates the policy.

    U.S. Labor Costs Up Solidly In Fourth Quarter
    Expect Republicans To Add Teeth To Iran Sanctions Bill
    Argentina Loses Its Intelligence
    Putin’s Unexpected Victory: Europe Furious That Greece Is Now A Russian Sanctions Veto
    Initial Jobless Claims Collapse To 15 Year Lows But Shale States Job Losses Explode
    Bill Gross Slams Broken Capitalism
    Germany Is Officially Back In Deflation: Stocks Slide
    Norway Regulator Fears Housing Bubble “Isn’t Sustainable”
    “Monetary Policy Has Lost Any Semblance Of Discipline,” Stephen Roach Slams “QE Lemmings
    Crude Contagion: California’s Kern County Declares Fiscal Emergency Due To Plunging Oil Price
    Why U.S. Colleges Should Welcome Undocumented Immigrants
    Fed Upbeat On U.S. Economy, Cites Strong Job Gains
    Fed Tea Leaves: Rate Hike Coming Midyear?
    U.S. Companies Cut More Than 1m Jobs A Month. When Did Workers Stop Mattering?
    Military Signs Deal For ‘Next Gen Passwords’
    Romney’s Huge IRA Makes A Comeback In Obama Retirement Proposal
    Low Oil Prices Could Send Economy Into Recession
    Five Reasons You Shouldn’t Believe The Government’s Debt Projections
    The What And The Why In Fed’s Next Moves
    Why Europe Will Cave To Greece
    Russia To Spend $35bn On Rescue Plan
    “Shadow Of The Crisis Has Not Passed”: Durables Goods Orders Collapse
    Aircraft Carrier Stennis Has Biggest Ordnance Onload Since 2010
    As The Middle Class Evaporates, Global Oligarchs Plan Their Escape Form The Impoverished Pleb Masses
    The Stunning Difference Between Unionized And Non-Unionized Wages
    Tax Reform Isn’t A Unicorn
    What Does Russia’s Junk Rating Mean?
    Does The Social Safety Net Make Us Lazy?
    Why Saudis Are Holding Strong On Oil
    Why Putin Will Fight On In Ukraine
    Read more from Economy & Politics...

    Liberty Investor Digest

    Get today's most important
    financial headlines all in
    one place by email!



    Sources


    close[X]

    Sign Up For Liberty Investor Digest™!

    Get Liberty Investor Digest FREE By Email!

    Input your name and email address in the fields below and get today's most important financial headlines sent straight to you inbox!

    Privacy PolicyYou can opt-out at any time. We protect your information like a mother hen. We will not sell or rent your email address to anyone for any reason.