Categories

Economy & Politics

Tools

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


    Bashing The Koch Brothers While Taking Soros Money: It’s A Democrat Thing; You Wouldn’t Understand
    Police Lobby Gears Up To Protect Militarization Of Law Enforcement
    Rand Paul: Hillary Clinton Is A Warmonger Who Would Get Clobbered In 2016
    Personal Spending Suffers First Drop Since January As Consumer Income, Outlays Miss
    Putin Says Everything U.S. Touches Turns Out Like Libya Or Iraq
    Obama: “We Don’t Have A Strategy Yet”
    A World Without Fractional Reserve Banks And Central Planning
    Obama’s National Security Council Meeting Has Concluded: Here Are The People Bringing You ISIS “Strategy”
    The Fed’s “Mutant, Broken Market”
    What Leading From Behind Looks Like
    The Democrats’ Problem
    The Drums Of War Beat For ISIS But Is Obama Ready?
    Eurosclerosis Comes To The U.S.
    Moscow Strategists View World As War Theater
    Arm Ukraine If You’re Ready To Fight For It 


    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.

    South China Sea Follies
    Now It’s Macau That’s Mad At China
    Islamic State’s Centuries-Old Strategy
    Hamas’s Big Victory Was Over The Arab States
    Nation Of Privilege Versus Rule Of Law
    The Republican Obamacare Battle Plan For 2015 
    Putin Has Changed The Game In Ukraine
    Romney? Again? Please Stop
    U.S. Consumer Spending Slips; Savings Highest In 1-1/2 Years
    Disappearing Euro Zone Inflation Set To Heighten ECB Concerns
    Japan Household Spending Slumps, Output Flat As Tax Pain Persists
    China Funds Cut Suggested Equity Allocations As Hopes For Recovery Evaporate: Reuters Poll
    Millennial Malarkey: The Myth That A Generation Hates Cars
    French Workers Aren’t As Lazy As You Think
    As Global Tensions Rise, Banks Need To Watch For Growing Cyber Threats
    The Obama Administration’s Stealth Plan To Remake The Workplace
    Is Technology Stagnating?
    India’s Coal Conundrum
    Putin’s Cherished Deniability Is Shattered
    Can The Middle East Redraw Itself?
    Congressional Budget Office Says Deficit Will Top $500 Billion This Year
    Vehicle To Vehicle Communication Requirements Could Give Government Control Over Personal Travel
    Leading Us To War Again
    Former HHS Cyber Security Director Guilty On Numerous Child Porn Charges
    Officials Say Hundreds Of Americans Have Joined Islamic State Terror Group As It Gains A Disturbing Amount Of Western Support
    Initial Jobless Claims Drop Back Under 300k, Continuing Claims Rise
    Ukraine Accuses Russia Of Launching Invasion, Then Promptly Retracts
    “Our Liberty Has Been Sacrificed On The Altar Of National Security”
    Bombs Away! Washington Has Gone Stark Raving Mad
    Russia Sanctions Hit German Consumers, “Economic Expectations Completely Collapse”
    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.