by
Adam Taggart
Yen
by
Gregor Macdonald
Executive Summary
- As goes Japan’s efforts to rescue it’s economy, so will go the U.S. and E.U.
- Japan’s options:
- Outsource its manufacturing base
- Replace as much human labor with automation as it can
- Rush to trade its depreciating currency for hard assets around the world
- What Japan is telling us about the Keynesian endpoint
If you have not yet read Part I: Abenomics’ Dismal Anniversary, available free to all readers, please click here to read it first.
Japan Is Reflecting the Future of Western Economies
While many observers continue to follow Europe as the proxy for post-growth dynamics in the OECD, it’s actually Japan that merits the closest analysis.
Much farther along in its post-growth phase, bloated with government debt and having tried a number of big-bang initiatives over the decades, Japan – not the U.S. or Europe – is leading the way. The country has never really recovered from the gigantic property and stock bubble over twenty years ago.
As proof, just consider the biggest trading story of the past 12 months. Was it the Federal Reserve’s intention to taper? How about the chaos in emerging market currencies in countries like India and Indonesia? Or perhaps the continued economic depression in peripheral Europe, as countries like Spain, Portugal, and Greece re-run the 1930s, with mass unemployment and people burning wood from forests to say warm? No, not even such dramatic suffering in Europe was enough to move markets or the EUR currency much this past year.
Instead, it was Abenomics and the front-running (and then chasing) of wildly huge moves in both the Nikkei and JPY that helped drive liquidity and speculative juices across all markets. It is not a coincidence that the peak of this frenzy in May heralded the peak in many markets.
But Japan has more than a financial problem. Despite the hand-wringing about Japan’s debt, the world has ignored for some time now Japan’s debt-to-GDP, GDP on an absolute basis, and Japan’s low cost of capital. Japan borrows. Japan prints. Japan devalues. But the world doesn’t care.
An issue the world may finally begin to care about, however, is that Japan has failed to launch itself out of deflation and is making very little progress in its struggle now. Indeed, Japan has a demographics problem and a resources problem that far outweigh its financial problems. To this point, instead of launching into recovery, Japan is running with the resources Red Queen, as every step of its currency devaluation is met with rising costs to import the raw materials Japan uses to make its goods…
We’re All Turning Japanese
PREVIEW by Gregor MacdonaldExecutive Summary
- As goes Japan’s efforts to rescue it’s economy, so will go the U.S. and E.U.
- Japan’s options:
- Outsource its manufacturing base
- Replace as much human labor with automation as it can
- Rush to trade its depreciating currency for hard assets around the world
- What Japan is telling us about the Keynesian endpoint
If you have not yet read Part I: Abenomics’ Dismal Anniversary, available free to all readers, please click here to read it first.
Japan Is Reflecting the Future of Western Economies
While many observers continue to follow Europe as the proxy for post-growth dynamics in the OECD, it’s actually Japan that merits the closest analysis.
Much farther along in its post-growth phase, bloated with government debt and having tried a number of big-bang initiatives over the decades, Japan – not the U.S. or Europe – is leading the way. The country has never really recovered from the gigantic property and stock bubble over twenty years ago.
As proof, just consider the biggest trading story of the past 12 months. Was it the Federal Reserve’s intention to taper? How about the chaos in emerging market currencies in countries like India and Indonesia? Or perhaps the continued economic depression in peripheral Europe, as countries like Spain, Portugal, and Greece re-run the 1930s, with mass unemployment and people burning wood from forests to say warm? No, not even such dramatic suffering in Europe was enough to move markets or the EUR currency much this past year.
Instead, it was Abenomics and the front-running (and then chasing) of wildly huge moves in both the Nikkei and JPY that helped drive liquidity and speculative juices across all markets. It is not a coincidence that the peak of this frenzy in May heralded the peak in many markets.
But Japan has more than a financial problem. Despite the hand-wringing about Japan’s debt, the world has ignored for some time now Japan’s debt-to-GDP, GDP on an absolute basis, and Japan’s low cost of capital. Japan borrows. Japan prints. Japan devalues. But the world doesn’t care.
An issue the world may finally begin to care about, however, is that Japan has failed to launch itself out of deflation and is making very little progress in its struggle now. Indeed, Japan has a demographics problem and a resources problem that far outweigh its financial problems. To this point, instead of launching into recovery, Japan is running with the resources Red Queen, as every step of its currency devaluation is met with rising costs to import the raw materials Japan uses to make its goods…
by
Gregor Macdonald
Global Slowdown
The U.S. economy weakened appreciably in the first quarter of 2013. But what if this weakness persists into the second quarter just completed, and worsens still in the second half of this year? Q1 GDP, as reported on June 26th, was revised lower to just 1.8%. And various indications suggest that Q2 could come in slightly lower still, at 1.6%. Might the U.S. economy be guiding to a long-term GDP of 1.5%? That’s the rate identified by such observers as Jeremy Grantham – the rate at which we combine aging demographics, lower fertility rates, high resource costs, and the burdensome legacy of debt. Well, after a four-year reflationary rally in just about everything, and now with an interest-rate shock, the second half of 2013 appears to have more downside rather than upside risk. Have global stock markets started to discount this possibility?
The Dead Weight of Sluggish Global Growth
by Gregor MacdonaldGlobal Slowdown
The U.S. economy weakened appreciably in the first quarter of 2013. But what if this weakness persists into the second quarter just completed, and worsens still in the second half of this year? Q1 GDP, as reported on June 26th, was revised lower to just 1.8%. And various indications suggest that Q2 could come in slightly lower still, at 1.6%. Might the U.S. economy be guiding to a long-term GDP of 1.5%? That’s the rate identified by such observers as Jeremy Grantham – the rate at which we combine aging demographics, lower fertility rates, high resource costs, and the burdensome legacy of debt. Well, after a four-year reflationary rally in just about everything, and now with an interest-rate shock, the second half of 2013 appears to have more downside rather than upside risk. Have global stock markets started to discount this possibility?
by
Gregor Macdonald
Executive Summary
- Japan is intentionally devaluing its currency through money printing. The recent boost in the Nikkei is simply the result of this flood of new money.
- Japan industry is now experiencing cost increases on two fronts: inflation of the money supply, and rising prices on the global market for commodities.
- Rising bond rates are all but guaranteed.
- Gold vs. the yen is surging and will pick up momentum from here
- The ten predictable events that will happen next, as the unavoidable Japan disaster unfolds
If you have not yet read Part I: The Arrival of Japan's Sunset available free to all readers, please click here to read it first.
In Part II we explain why Japan has unequivocally entered the terminal phase of its 20-year reflationary experiment.
Further “abundance” harvesting from this point forward will be difficult if not impossible.
Is the devaluation of the yen really the successful technology that will fool nature? We think not. The outcome will have spectacular implications for many global assets, ranging from real estate, to stock markets, to oil and gold.
Observers of Japan from this point forward should be sober about the threshold the country has now crossed. Japan has effectively said to the world: Go ahead, make my day. Sell our currency, give us inflation, and get out of our bonds.
Japan has indeed taken to heart the Krugman dictum, and committed to irresponsibility.
The 10 Next Predictable Steps to Japan’s Unfolding Disaster
PREVIEW by Gregor MacdonaldExecutive Summary
- Japan is intentionally devaluing its currency through money printing. The recent boost in the Nikkei is simply the result of this flood of new money.
- Japan industry is now experiencing cost increases on two fronts: inflation of the money supply, and rising prices on the global market for commodities.
- Rising bond rates are all but guaranteed.
- Gold vs. the yen is surging and will pick up momentum from here
- The ten predictable events that will happen next, as the unavoidable Japan disaster unfolds
If you have not yet read Part I: The Arrival of Japan's Sunset available free to all readers, please click here to read it first.
In Part II we explain why Japan has unequivocally entered the terminal phase of its 20-year reflationary experiment.
Further “abundance” harvesting from this point forward will be difficult if not impossible.
Is the devaluation of the yen really the successful technology that will fool nature? We think not. The outcome will have spectacular implications for many global assets, ranging from real estate, to stock markets, to oil and gold.
Observers of Japan from this point forward should be sober about the threshold the country has now crossed. Japan has effectively said to the world: Go ahead, make my day. Sell our currency, give us inflation, and get out of our bonds.
Japan has indeed taken to heart the Krugman dictum, and committed to irresponsibility.
by
Adam Taggart
by
Adam Taggart
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