No Shock, A Bigger Theatrical Budget

You have to understand, none of this is about money or even bonds. It is all intended for one thing and one thing only: expectations. This has been the fulfillment of Paul Krugman’s long-ago criticism. The way out is to shock the system, he said. It doesn’t even matter, by this theory, what you do. So long as it is outside of every market expectation, that’s the only goal.

Japan, who was the target of Dr. Krugman’s reproach, and after having consulted with the former Economist (he’s now just a political carnival barker), finally gave in and decided to give it a try. QQE was the “shock and awe” which was intended to “credibly promise to be irresponsible.” I’m not going to recount the reasoning behind all this because it’s both tiresome and absurd.

And I’ve done it many times before because it just doesn’t work. How many more promises to be irresponsible do they get?

The essence of the central bank puppet show is exactly this premise. In a world desperate for some monetary answers, some real damn money, central bankers can only think and act in terms of theater.

What can I do to make you think I’m doing more than you ever thought I would?

As ridiculous as that sentence is to write, it is a perfect synopsis of monetary policy in the QE-era. It was the very basis for not just Japan’s QQE but also the Fed’s QE3 (open-ended). There’s no money printing in monetary policy because there’s no money anywhere around the central bank. What’s left is only the theatrics.

By October 2014, not even two years into it, Kuroda had already left himself hanging by an ineffectual response. The shock and awe would have to become more shock-y and awe-y. QQE was adjusted to even more QQE.

Kuroda prefers shock and awe. Investors were wrong-footed by the scale of the BOJ’s quantitative easing when it was first announced last year. Now Kuroda has ambushed them again.

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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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