Money and Finance
Link to article: Abe’s third arrow, the second time round
- Links
How a 25-Year-Old Sparked Plunge at Lumber Liquidators (LINK) Horizon Kinetics' March Commentary (LINK) Absolute Return Letter - March 2015: Tigers in Africa (LINK) A Warning From Buffett About Banks [H/T Linc] (LINK) The $62bn secret of Warren Buffett’s...
- Albert Edwards On Japan...
Excerpts from Edwards’ report via ValueWalk: There is a large body of highly respected commentators who dismiss the notion that Japan is bust. My friend, former colleague and Japan guru, Peter Tasker is certainly one of them. In a recent FT article...
- Kyle Bass Bets On Full-blown Japan Crisis
Kyle Bass hopes he is wrong, and so may everyone else, as the danger predicted by the founder of Dallas-based Hayman Capital is nothing less than a full blown financial crisis in the world’s third-largest economy, Japan. While the hedge-fund trade of...
- Liaquat Ahamed Quote
From Chapter 9 of Lords of Finance. I wish I could find the whole chapter online to post, as it is a very good one to review when thinking about the similar choices many governments are facing today. The war in this quote is referring to World War I....
- Hussman Weekly Market Comment: A Fed-induced Speculative Blowoff
Why are Treasury yields rising despite hundreds of billions of Treasury purchases by the Federal Reserve? There are two possibilities in the current debate. One is that the Fed's policy of purchasing Treasuries has scared the willies out of the bond...
Money and Finance
Abe’s third arrow, the second time round - by Andrew Smithers
Link to article: Abe’s third arrow, the second time round
Abenomics, the term given to the reform package Japanese prime minister Shinzo Abe launched to revive the country’s economy, is based on two myths. One is that the economy has performed badly and the second is that this non-existent failure has been due to deflation. Despite its lack of intellectual justification, the attempt to stop deflation has been a success as the accompanying rhetoric and monetary policy have produced yen weakness. This was an essential step towards solving Japan’s fiscal problem and, as the rhetoric has been about deflation rather than devaluation, the dramatic weakness of the currency has been achieved without international opprobrium.
Over time the devaluation should result in an improved current account. This will allow the fiscal deficit to fall while the economy moves ahead, but it is not enough on its own. The other essential is to reduce the cash flow surplus of the business sector. Having achieved success in step one, largely by accident, there is a chance that Abenomics will succeed in step two. If it does, it is again likely to be an accident.
Mr Abe has announced that corporation tax will be cut sharply. This was heavily leaked in advance but the details, which are crucial to its effect, remain unknown. This obscurity extends to the purpose of the change as well as to its implementation. Past announcements suggest that the aim is to encourage higher growth through higher investment. This is absurd. Japan invests too much at home and the return on new capital is, therefore, depressingly low. Encouraging higher investment is like asking water to flow uphill. (For details, see my recent presentation to the Bank of England’s Chief Economists Worksho: “Abenomics – Myths, Rhetoric and Reality”.)
- Links
How a 25-Year-Old Sparked Plunge at Lumber Liquidators (LINK) Horizon Kinetics' March Commentary (LINK) Absolute Return Letter - March 2015: Tigers in Africa (LINK) A Warning From Buffett About Banks [H/T Linc] (LINK) The $62bn secret of Warren Buffett’s...
- Albert Edwards On Japan...
Excerpts from Edwards’ report via ValueWalk: There is a large body of highly respected commentators who dismiss the notion that Japan is bust. My friend, former colleague and Japan guru, Peter Tasker is certainly one of them. In a recent FT article...
- Kyle Bass Bets On Full-blown Japan Crisis
Kyle Bass hopes he is wrong, and so may everyone else, as the danger predicted by the founder of Dallas-based Hayman Capital is nothing less than a full blown financial crisis in the world’s third-largest economy, Japan. While the hedge-fund trade of...
- Liaquat Ahamed Quote
From Chapter 9 of Lords of Finance. I wish I could find the whole chapter online to post, as it is a very good one to review when thinking about the similar choices many governments are facing today. The war in this quote is referring to World War I....
- Hussman Weekly Market Comment: A Fed-induced Speculative Blowoff
Why are Treasury yields rising despite hundreds of billions of Treasury purchases by the Federal Reserve? There are two possibilities in the current debate. One is that the Fed's policy of purchasing Treasuries has scared the willies out of the bond...