Categories

Economy & Politics

Tools

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


    Americans Feel Increasingly Divided, Fault Obama And Congressional GOP
    You Know It’s Bad When…
    China Manufacturing PMI Explodes To 18-Month High, Employment Drops 9th Straight Month
    The Real Evil Of Monetary Central Planning
    Americans Are Living In ‘Atlas Shrugged’
    Why ‘The U.S. Should Have Already Panicked,’ The Sectarian Divide Mapped Out
    Senate Democrats Push To Triple Israel’s Iron-Dome Aid To $576 Million
    Head Doctor Fighting Africa’s “Out Of Control” Ebola Epidemic Contracts The Virus
    The Decline Of Influence
    GOP Offers Immigration Proposals, Democrats Want Money Without Policy Change
    Don’t Believe Those Lying Job Numbers
    Justice Kennedy Needs A History Lesson
    Another Day, Another IRS Revelation: Backups From The Lois Lerner Era Do Exist, Commissioner Admits
    Western Threats Mean Little To Putin
    Party Democracy Keeps U.S. Democracy Alive


    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.

    Europe Sleeps As Putin Waits
    The Fed Can’t Lower Your Grocery Bill
    Why Putin Isn’t Afraid Of Europe
    Liars, Cheats And Communists
    Eric Cantor’s Obvious Next Act
    Jobless Claims Fall To Lowest Level Since Early 2006
    Global Economy Starts Second Half On Solid Footing
    China July HSBC Flash PMI At 18-month High
    Bank Settlements Create Windfall For U.S., And Wrangling Over How It Is Spent
    As U.S. Strengthens, Sluggish Wages Explain Fed’s Caution
    Republican Lawmaker To Grill U.S. SEC Over Ackman Tactics
    An Annotated History Of World Oil Price Shocks
    Insolvent Chinese Construction Company Gets Last Minute Bailout, Avoids China’s Second Bond Default
    Rebels Shoot Down Two Ukraine Fighter Jets, Defense Ministry Reports
    US State Department “Confident” MH17 “Mistakenly” Downed By Separatists, Finds No Direct Link To Russia
    The Stealing Of America By The Cops, The Courts, The Corporations And Congress
    Poroshenko Demands Ukraine Separatists Be Declared “Terrorists” Under International Law
    Krugman’s Latest Debt Denial: Why His Two Magic Numbers Don’t Cut It
    The Baltic Dry Index Collapses To 18-Month Lows; Worst July Since 1986
    California’s Drought Could Tip America Toward Economic And Social Turmoil
    IRS Says Lerner’s Emails May Be Recoverable After All
    Department Of Justice, Homeland Security Must Go On Offensive Against Growing Right-Wing Threat
    Is There A Fracking Bubble?
    This Emerging Malware Sends Secret Messages And Is Practically Impossible To Detect
    The Long-Term Joblessness Battle Isn’t Over
    Courts Can’t Fix Obamacare
    When Terrorists Have Drones
    Japan Readies Fuel Cell Subsidies In Bet On Toyota’s Next Big Thing
    U.S., European Airlines Halt Flights To Israel Due To Instability
    Puerto Rico Debt Crisis Headed For U.S.-style Bankruptcy Resolution
    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.