Yet it's still rather breathtaking to realize how many don't grasp that the bad joke is on themselves. And also very sad. Only thing hyper inflated is the criminally vicious humor shared by both victims and perps.
"Japanese Yen Heading For Hyperinflation"
Is it immoral to take candy from your own babies ... and their lunch (and diapers, and toys, and roof ... and future) too? When is enough too much?
The problem.
(Note that he even helped turn it in.)
Next: one step to understanding how to fix it.
That and an introduction to Ben Franklin, Abe Lincoln and Marriner Eccles.
Is that asking too much?
If more citizens orient to current reality by age 10, maybe then we could start a much needed national discussion about Policy Space and Policy Agility. So far most citizens respond to that request with a blank stare, like a deer in the headlights. That's not gonna cut it ..... in the struggle to have our Democracy and use it too.
10 comments:
I think the Yen will go down in value from all this money creation. So far reality is more conforming to my expectations. When Japan does surprise you with hyperinflation you will just say it is from something other than money creation.
Have you seen where I fixed up MMT?
http://howfiatdies.blogspot.com/2013/09/cmmt-cates-modern-monetary-theory.html
Vince,
I think we're talking past each other so far.
What I'm trying to address is the difference between Group Policy and Personal Tactics.
In the end, we must coordinate group policy and distributed tactics, since they are not independent. It's self defeating to conflate Aggregate Adjustments and Distributed Change.
see http://econintersect.com/b2evolution/blog2.php/2014/02/12/aggregate-adjustments-and-distributed-change
There are limits to every method employed by components in a system. In this case, the excessive application of capitalism for the sake of capital is merely a method searching for a purpose.
You see that excess thrown out the window every time we're motivated to team or national effort, such as during wars.
Coordinated teams achieve amazing things. No one argues with that.
Yet they turn around and argue that GROWING teams must ARBITRARILY LIMIT THE CURRENCY SUPPLY used to denominate the growing body of unpredictably distributed, coordinated activities of their growing numbers of team members.
Something has to give in that illogic, or else nations cannot grow.
Inflation of the denomination unit is an absolutely unavoidable outcome of growing populations and economic growth. It's also irrelevant to all except those irrationally seeking to hoard unexpressed fiat (i.e., currency) BEYOND the half-life of dynamically changing contexts.
The solution is to adjust distributed incomes so that all citizens can express the distributed fiat requested by the citizenry - on demand, as contexts change.
That's called keeping distributed teams provisioned. Every army understands this.
The myth of a "stable" unit of fiat is just that, a mathematically impossible myth.
We have bigger group options to explore. The minute team members start excessively hoarding units of group fiat .... national and team performance degrades, and nations start to die.
Those who are sure the sky's gonna fall in any day now for the yen should short yen and yen bonds.
Predictions with no clock on them are meaningless.
Tom, things that happen as positive feedback loops are hard to put a clock on. Look at Earthquakes, avalanches, forest fires, etc. Experts can tell there is a risk but not say the date and time. But it is not meaningless when they say there is a "high risk".
http://howfiatdies.blogspot.com/2014/08/positive-feedback-theory-of.html
I am short the Yen.
While I agree with that there are positive feedback loops, I doubt that Japan's high public debt level alone is likely to be primary cause of inflation in Japan, especially the extraordinary high public level historically along with Japan's persistent current account surplus, and the fact that Japan has been stuck in a deflationary bias for decades.
From the Keynesian perspective the problem is lagging demand. Japan needs to figure out how shift policy in order to increase domestic private spending to get its economy moving. Present policy is leading to increased net saving, the deficit being the increase in aggregate net financial assets for the period.
It seems that no matter how accommodative policy gets, saving increase rather than spending. Japanese policymakers don't seem to be looking in the right direction to address the underlying issues.
Generally, export-driven economies that run persistent external surpluses to support their export industries need to repress consumption to avoid domestic inflation, which they export to net importers where demand is controlled by also importing imbedded labor.
Germany and China suppress domestic inflation by controlling domestic consumption through limiting wages. But Japan has erred in reducing domestic spending too much and needs to stimulate demand, and exports are not sufficiently offsetting. So that leaves the government sector to address the issue.
As Warren Mosler likes to say, taxes are too high, especially on lower income workers, given the size of government. So either the deficits have been too low to offset domestic saving desire, or poorly targeted to increase domestic spending. The result has been lagging growth and a deflationary environment owing to low domestic demand.
Of course, this is a general analysis and there are many specifically Japanese factors involved, for example, demographics. The Japanese population is aging and that affects economic behavior.
I would be looking more to these factors for what the Japanese economy might do if left unaddressed rather than concluding that "too much public debt" is a chief cause of future inflation. It is probably more arguable in conventional economic terms to think that high debt leads to expectation higher taxes in the future, therefore, higher domestic saving, and therefore, to see a deflationary bias rather than an inflationary one — although I think that is also wrong.
Being short a currency is betting that the currency will fall relative to other currencies (aversion) and being long a currency is betting that the currency will rise relative to other currencies (demand).
The bet is not clear wrt to one currency pair, where one is betting that one currency will move relative and that the pair selected with be the most profitable trade. This implies that one currency is strengthening against the pack and the other currency is falling against the pack. The current move seems to be dollar demand due to a variety of factors, falling deficit, prospect of monetary tightening, and promise of growth increasing, rather than aversion directed toward other currencies.
Generally speaking, traders bet on one way, e.g., now on dollar strength increasing so they hedge the bet by taking a long position in the USD in multiple currencies. Of course, if demand and aversion can be identified simultaneously, this is a further factor that enters the picture.
One factor is fiscal stance, whether a government is tightening fiscal policy or loosening it. Another factor is monetary policy, whether tightening or loosening. There are numerous factors that are relevant and none is dominant enough all the time to trade on. If there is a dominant factor it is probably figuring out how to be on the other side of the dumb money.
Japan needs to solve their shrinking population problem. It is the only "real" problem that could cause long term problems for the yen.
The problem with betting on a weak Yen, is that to maintain the weak yen is that the government has had to accumulate large amounts of foreign currency to prevent the yen from a disorderly rise based on market demands. Based on a "free markets" type of analysis where the BoJ had not interfered, the yen would be much, much higher today. The only thing that prevented the Yen from rising was government mercantilism policy was popular among the voters because of a historical bias toward producing goods for export.
Since Fukushima, they've had an easier time keeping the yen contained as their energy imports have diminished their Current Surplus problem.
To make a case for Yen to inflate (much less hyper-infl), the BoJ would have to ignore the falling exchange rate, refuse to sell their 1.2 trillion in reserves to support their currency/economic/inflation targets. They would have to refuse to turn off QE and not raise rates when capital flowed out. The government has long supported a weak currency. And this year, they've leaked that they would like to see Yen weaken a bit more against the dollar. But to keep it going lower, the government has to act -- absent government commitment to a lower yen, it would strengthen, especially as Sendai and the other large reactors slated start producing electricity in next few months come back online. Japanese fx reserves and gold are what, 50% total external debt? Betting on a balance of payments crisis and a zimbabwe seems pretty far fetched. To me the bias looks like the opposite could happen if government stopped supporting a weak currency and if they began promoting fertility in their population.
Tom, I am something of a gold and silver bug so I have bets on those going up measured in dollars that are comparable in size to my bet on the Yen going down measured in dollars. It is sort of like where the dollar ends up does not really matter to me. If gold and silver go up in terms of Yen, I win. Given that I think the debt of 240% of GNP will be monetized with lots of new Yen, and that nobody is printing gold or silver, I think it is a good bet. Time will tell.
Good luck, Vince. I respect that you are walking your talk.
Thanks Tom!
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