Nine Percent Of GDP Fiscal, Ha! Try Forty

Fear of the ultra-inflationary aspects of fiscal overdrive. This is the current message, but according to what basis? Bigger is better, therefore if the last one didn’t work then the much larger next one absolutely will. So long as you forget there was a last one and when that prior version had been announced it was also given the same benefit of the doubt.

Most people don’t like looking to Japan mainly because it is too depressing; unless one is an Economist who just doesn’t want to admit such theoretical failures of the scale that would up-end the entire discipline. Whatever the underlying reason, each prefers instead to come up with rationalizations for why when every Western country does the exact same things the Japanese have already tried the results will somehow, someway scroll up differently. That’s not logic; it’s unrivaled insanity.

Japanese officials are themselves insane to a substantial degree, but who is more far-gone: those who keep doing the same things regardless of results, or others who have the ability to identify and track those undesirable results without harming their own yet choose to undertake the same ideas anyway?

Abenomics began with a bang; in January 2013, Prime Minister Shinzo Abe first bullied the Bank of Japan into his first “arrow”; the monetary policy “easing” that would be called QQE (begun in April that year), the monetary piece of this Abenomics. It was declared a massive monetary expansion, unrivaled anywhere since perhaps Germany circa 1922-23 – only this time it was to be intentional.

Abenomics’ second arrow was fiscal expansion. While not quite as “reckless” as QQE, and why it comes second in Abe’s clearly arranged pecking order, Japan’s Cabinet Office was alighted with a hefty ¥20.2 trillion in “stimulus” to start with January 2013. As these things go, the announced number is always a bit fuzzy and puffed up to, very much like QQE, add to the shock and awe effect (which leads one to question what apart from shock or awe is left to affect?)

A little over half of the total, about ¥10.3 trillion, would come down in the form of “direct” federal government spending; the remainder, some ¥9.9 trillion, was meant to flow through local governments and private channels deploying credits and grants (via the Trust Fund Bureau or one of the 30-some other “agencies” tapped into “secondary” budget resources).

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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