THE WORLD IS TURING JAPANESE

Courtesy of: Visual Capitalist
Nearly a year ago, Bank of Japan governor Haruhiko Kuroda described the unlikely inspiration behind Japan’s unprecedented monetary stimulus: Peter Pan.
“I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it’. Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions.”

Kuroda’s optimism is desperately needed in a country that has now been officially “leapfrogged” by the four Asian Tigers in terms of Real GDP per capita (PPP). With over a decade of experimentation in extreme monetary policy under their belts, Japan has very little to show for it.

It would be fine if this story of economic malaise could be confined as a global outlier. However, recent circumstances have prodded the world’s central bankers to finally buy into the tale of Peter Pan.

The world is turning Japanese.

So Much Negativity

Negative interest rates were an economic pipe dream many decades ago, but the idea of “charging” interest to hold money is now becoming mainstream. Conventional wisdom was that depositors would just hoard cash rather than depositing at a cost, but now the people running central banks are beginning to believe that this fear is misplaced. Especially as society becomes more cashless, the inconvenience of withdrawing money to save a few bucks isn’t worth it.

Central banks in Switzerland, Sweden, Denmark, and Japan now all have negative interest rates. The ECB has also held their Deposit Facility Rate for overnight deposits in the negative since June 2014.

In recent weeks, the interest in this economic experiment has risen significantly. Sweden cut their rates deeper into negative territory, signalling to the rest of the world that there is nothing to fear. Meanwhile, both the Federal Reserve and the Bank of Canada have openly pondered the possibility of NIRP in their respective jurisdictions.

Misplaced Conviction?

Not everyone agrees with the central bankers in seeing the Peter Pan analogy to be a fitting representation.

We’d liken it more to a squad of musketeers running out of gunpowder, and turning desperately to their bayonets to win a decision. It doesn’t matter how much conviction and optimism the crew has in their bayonet skills – at the end of the day, it’s only going to add a few extra minutes of life into the inevitable battle against a much more powerful deflationary force.

In other words, “hope” isn’t a strategy that central bankers can use to any efficacy, and wishful thinking can only go so far. The market seems to agree, and it’s part of the reason that stocks have sold off this year. Even the “safe haven” gold trade is back, after being absent for much of the previous year.

Many critique assets such as gold, which is up 15% year-to-date, because it does not pay a dividend or interest.

This may be true, but at least gold does not “charge” interest, as bankers across the world are beginning to ponder.


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kokoda
kokoda

Keep the corrupt gov’t machine running – screw the citizens.
The Banksters, our International Corp’s, Hedge Funds, and Private Equity Groups can continue to borrow Hundreds-of-Billions at virtually no interest charge, but this will not be afforded to the citizens.

ZIRP and NIRP allow the Banksters to retain the interest they would normally pay out to savers.

My thanks to all the liberal dumb-ass liberal Keynesian economists.

Thaisleeze
Thaisleeze

A major part of the problem is that any economist wishing to go far in their careers are bound to go with the train of thought emanating from the Fed, regardless of their nationality.

It became apparent to me before the last crisis when thanks to a business contact being the spouse of an ASEAN central bank governor I had chance on 2 occasions over lunch at their home to ask about life as a central banker. Firstly, the Asian CB had scheduled monthly meetings with the Fed. Secondly, the best and most promising Asian economists were selected for temporary postings to the Fed in Washington, with the ‘very best’ being offered chances to spend time at ivy league colleges sucking up more of the only theories in town. As for grants for advanced research, yes, only available to those that toe the party line.

The international web of like minded economists (who are wrong) has been bound together and become self reinforcing. An ASEAN economist has literally no chance of making to the top of their profession unless they echo opinion of the Federal Reserve. Dissenters are incredibly rare as it is game over as civil servants if they demure and have differing opinions.

When you look at CB governors, and senior BIS and IMF economists, their CVs all look alike and their lifestyles are such many want to emulate them and become Fed whores as a result.

rhs jr
rhs jr

Not Japanese but Global Illuminati.

rhs jr
rhs jr

“For all nations have drunk of the wine of the wrath of her fornication, and the kings of the earth have committed fornication with her, and the merchants of the earth are waxed rich through the abundance of her delicacies.” Rev18:3 The Beast will control all the world’s commerce (except the Beast does not dominate Russia, Iran, China, Syria, Libya and North Korea; they will destroy the Beast).

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