Japan has fallen victim to the Keynesian scam

[Martinghoul]

...then for heaven's sake please do not embark on the historically grandest and riskiest QE experiment ever undertaken by human kind. Japan really does not have a track record of understanding economics, monetary policy and financial markets all that well. What they ended up with for now are inflated equity markets, an entirely disfunctional JGB and money market and the exact same problems they faced before.

Ah, this is a brilliant opportunity for me to use Tsing's line from a post above...

"... - how can you possibly know this until you try?"

BTW, the above is a mighty arrogant thing to say, don't you think? I am more inclined to think that the real issue is that the Westerners that talk about Japan don't understand it.

 

[Tsing Tao]

I am posing a hypothetical question... Suppose I told you that Japan is a country where, as things currently stand, required structural reforms cannot realistically happen. Whether it's because they are politically not feasible or because they contradict some deep-seated cultural norms or some other reason doesn't matter. What would be the potential solution?

It is important as to the why, Martin. If you tell me something is not politically feasible, I have a hard time accepting that because it is simply a matter of choice and desperation - where there is a will there is a way. If you were referring to the aging population issue, that might be a bit tougher to solve.

 

[Tsing Tao]

Ah, this is a brilliant opportunity for me to use Tsing's line from a post above...

"... - how can you possibly know this until you try?"

BTW, the above is a mighty arrogant thing to say, don't you think? I am more inclined to think that the real issue is that the Westerners that talk about Japan don't understand it.

No no...don't try using my quote. I don't have to actually try driving a car into a brick wall to know that it is a bad idea. Some outcomes can be determined without performing "crazy".

 

[Martinghoul]

It is important as to the why, Martin. If you tell me something is not politically feasible, I have a hard time accepting that because it is simply a matter of choice and desperation - where there is a will there is a way. If you were referring to the aging population issue, that might be a bit tougher to solve.

Well, it's all part and parcel of the same underlying problem, innit? The Japanese population doesn't want to change and Japanese politics reflect that. This applies to everything: demographics, protectionism, immigration, women in the workforce, government debt, etc etc etc. Like volpunter, I have no doubt whatsoever that it would be mighty awesome if, by some magic, an inspirational leader came along (there was hope at one point that Koizumi was the one) and made the Japanese people realise that their country, wonderful as it might be, is slowly circling the drain and falling behind its competitors. Moreover, if such a leader could get the Japanese people to accept a lower standard of living today in exchange for necessary reform that will allow their descendants to, hopefully, be more competitive in the future, that would be great. But what if there is no such miracle? What if the Japanese people with all of their various vested interests are so resistant to any change to status quo that no reform is possible? What is the solution in this case?

No no...don't try using my quote. I don't have to actually try driving a car into a brick wall to know that it is a bad idea. Some outcomes can be determined without performing "crazy".

Well, I would have to disagree with you there... If you're pretty certain that if your car is about to be squashed by a steam roller that you can see inches behind you and you had no other choice, wouldn't you actually try driving a car into a brick wall? Who knows, you might discover that the wall, in fact, is made of plywood. Low odds, but better than the certainty of being squashed, perhaps?

 

[volpunter]

Because they tried for decades from the time their bubble burst late 90s. Can you please explain what all the countless fiscal programs and the easy monetary policy accomplished? And because that worked so well multiplying the size by 100 is gonna do the trick? It's like being under water and leveraging the last penny out of your account on a position that currently goes against you.

I dare to say it is much safer to assume that the affect will at best be minimal on the real economy and at worst lead to a total monetary disaster rather than hoping that this time around the effect of monetary easing will be different.

And what is mighty arrogant? That someone who speaks nearly perfect Japanese with Japanese spouse, having studied as part of his undergrad studies at a Japanese university and later on after his financial engineering Masters degree worked for many years at tier 1 ibanks' trading desks and a formerly keen interest in understanding and learning what greases the wheels in Nippon. That such person cannot possibly possess more knowledge of Japanese economics and Japan in general than even most Japanese themselves? On average I would agree with you but sometimes it yields much more to have someone take an informed look at a culture and it's dynamics from the outside. Japan in 2015 is essentially still cutting itself off the best advice it can get by basically resorting opinions of gaijins, no matter how educated and knowledgeable, and knowledge and wisdom of women to the trash can. The most revered person still today is your average salary man with minimal education but lots of drinking and sports club expertise and a follow-the-herd self-sacrificial attitude to life.

Ah, this is a brilliant opportunity for me to use Tsing's line from a post above...

"... - how can you possibly know this until you try?"

BTW, the above is a mighty arrogant thing to say, don't you think? I am more inclined to think that the real issue is that the Westerners that talk about Japan don't understand it.

 

[volpunter]

I think what you are approving and signing is essentially turning a Datsun into a Ferrari and crashing that into a concrete wall. I do not see any steam roller, certainly not inches away. But hey that exact same line of scare was applied when billions of dollars were misappropriated to save bankrupt companies from their demise In the US. Precisely for that reason the average consumers' savings and living standards are essentially today lower than they were before the crisis. The only thing that is higher is equity markets and the number of ridiculous business ideas that were financed in the tens of billions.

There are many things that a Japanese prime minister can do without committing political Harakiri. You make it sound as if this QE program is the only realizable choice. Well it certainly is not.

Well, it's all part and parcel of the same underlying problem, innit? The Japanese population doesn't want to change and Japanese politics reflect that. This applies to everything: demographics, protectionism, immigration, women in the workforce, government debt, etc etc etc. Like volpunter, I have no doubt whatsoever that it would be mighty awesome if, by some magic, an inspirational leader came along (there was hope at one point that Koizumi was the one) and made the Japanese people realise that their country, wonderful as it might be, is slowly circling the drain and falling behind its competitors. Moreover, if such a leader could get the Japanese people to accept a lower standard of living today in exchange for necessary reform that will allow their descendants to, hopefully, be more competitive in the future, that would be great. But what if there is no such miracle? What if the Japanese people with all of their various vested interests are so resistant to any change to status quo that no reform is possible? What is the solution in this case?

Well, I would have to disagree with you there... If you're pretty certain that if your car is about to be squashed by a steam roller that you can see inches behind you and you had no other choice, wouldn't you actually try driving a car into a brick wall? Who knows, you might discover that the wall, in fact, is made of plywood. Low odds, but better than the certainty of being squashed, perhaps?

 

[Tsing Tao]

Well, it's all part and parcel of the same underlying problem, innit? The Japanese population doesn't want to change and Japanese politics reflect that. This applies to everything: demographics, protectionism, immigration, women in the workforce, government debt, etc etc etc. Like volpunter, I have no doubt whatsoever that it would be mighty awesome if, by some magic, an inspirational leader came along (there was hope at one point that Koizumi was the one) and made the Japanese people realise that their country, wonderful as it might be, is slowly circling the drain and falling behind its competitors. Moreover, if such a leader could get the Japanese people to accept a lower standard of living today in exchange for necessary reform that will allow their descendants to, hopefully, be more competitive in the future, that would be great. But what if there is no such miracle? What if the Japanese people with all of their various vested interests are so resistant to any change to status quo that no reform is possible? What is the solution in this case?

Discussing what is required and what is likely are two distinct topics.

Well, I would have to disagree with you there... If you're pretty certain that if your car is about to be squashed by a steam roller that you can see inches behind you and you had no other choice, wouldn't you actually try driving a car into a brick wall? Who knows, you might discover that the wall, in fact, is made of plywood. Low odds, but better than the certainty of being squashed, perhaps?

This is silly. There was no steamroller behind Japan at any time. Merely the slow decline into insignificance. To instigate a tried and failed program, but just add more to it in the hopes that size is what caused it to fail and not policy altogether is just an example of "doing the same thing over and over but expecting different results".

 

[Martinghoul]

Because they tried for decades from the time their bubble burst late 90s. Can you please explain what all the countless fiscal programs and the easy monetary policy accomplished? And because that worked so well multiplying the size by 100 is gonna do the trick? It's like being under water and leveraging the last penny out of your account on a position that currently goes against you.

I dare to say it is much safer to assume that the affect will at best be minimal on the real economy and at worst lead to a total monetary disaster rather than hoping that this time around the effect of monetary easing will be different.

Well, I dunno if you've read anything that's been written about the Japanese bubble, but there are quite a few people who suggest that things would have been much much worse, if it weren't for the fiscal programs and expansionary monetary policy. There is some evidence for this provided, for example, by Richard Koo in his various pieces.

And what is mighty arrogant? That someone who speaks nearly perfect Japanese with Japanese spouse, having studied as part of his undergrad studies at a Japanese university and later on after his financial engineering Masters degree worked for many years at tier 1 ibanks' trading desks and a formerly keen interest in understanding and learning what greases the wheels in Nippon. That such person cannot possibly possess more knowledge of Japanese economics and Japan in general than even most Japanese themselves? On average I would agree with you but sometimes it yields much more to have someone take an informed look at a culture and it's dynamics from the outside. Japan in 2015 is essentially still cutting itself off the best advice it can get by basically resorting opinions of gaijins, no matter how educated and knowledgeable, and knowledge and wisdom of women to the trash can. The most revered person still today is your average salary man with minimal education but lots of drinking and sports club expertise and a follow-the-herd self-sacrificial attitude to life.

Yes, this sounds pretty arrogant to me...

There are many things that a Japanese prime minister can do without committing political Harakiri. You make it sound as if this QE program is the only realizable choice. Well it certainly is not.

Yes, this is precisely the question I have asked a number of times now. What are these things? Since you have described yourself as an expert, I would expect you'd be able to suggest all sorts of options.

Discussing what is required and what is likely are two distinct topics.

I am interested in discussing what might lie at the intersection of what is required and what is realistic.

This is silly. There was no steamroller behind Japan at any time. Merely the slow decline into insignificance. To instigate a tried and failed program, but just add more to it in the hopes that size is what caused it to fail and not policy altogether is just an example of "doing the same thing over and over but expecting different results".

Well, surely some people in Japan think different. Moreover, a lot of Western HF types appear to think different as well (they keep betting on Japan imploding every year, with amazing regularity). Are you also such an expert at all things Japanese that you can be sure you know better? As to the "tried and failed" program, pls see my comment above.

 

[Tsing Tao]

I'm not an expert at all things Japanese. But it is plainly visible that there was no "steamroller" about to crush the Japanese economy. It was continuing it's descent into nothing-ness when lunacy about Abenomics was brought forth. It's more an example of Abe being fed up with the results than worried about imminent demise.

So instead of trying a new approach, he "doubled down" or tripled if you will. That was the "radical" approach.

 

[volpunter]

The only try and failed you mention is the fiscal and monetary easing Japan has undertaken and which utterly failed. So, now you pull the next skull out of the closet and try to cite people who claim to have evidence that Japan would be in much worse shape without the trillions of yen in fiscal and monetary stimulus over the past 20 years? Lol, I am sure I can find a highly respected researcher who claims that coffee is the all-round weapon against any sorts of cancer. Mate, I think we can agree that 99% of the finance community at large agrees that fiscal and monetary stimulus has NOT worked for Japan.

How can we move on to a meaningful discourse if we already disagree on basic facts?

Well, I dunno if you've read anything that's been written about the Japanese bubble, but there are quite a few people who suggest that things would have been much much worse, if it weren't for the fiscal programs and expansionary monetary policy. There is some evidence for this provided, for example, by Richard Koo in his various pieces.

Yes, this sounds pretty arrogant to me...

Yes, this is precisely the question I have asked a number of times now. What are these things? Since you have described yourself as an expert, I would expect you'd be able to suggest all sorts of options.

I am interested in discussing what might lie at the intersection of what is required and what is realistic.

Well, surely some people in Japan think different. Moreover, a lot of Western HF types appear to think different as well (they keep betting on Japan imploding every year, with amazing regularity). Are you also such an expert at all things Japanese that you can be sure you know better? As to the "tried and failed" program, pls see my comment above.