Panic Mode

The Japanese stock market rose last night as the Bank of Japan intervened, buying stocks through its proxy banks. The BoJ’s panic money-printing has roiled markets around the world, not for the first time as the inventor of QE has caused financial grief for many years since the Nikkei crash in 1990.

However, this is probably the end game for Japan as the BoJ’s credibility, to say npothing of that of the Japanese government, is in shreds. Japan’s economy is a mess of fiscal and monetary mis-management, demographic decline and, more recently, natural disaster compounded by denial and incompetence. More monetary mis-management will not fix things.

The rest of the world is not in much better shape. Europe is locked in recession, current data such as todays’ manufacturing reports show the U.S. is not far behind if not already there, and China is a big question mark as endogeneous data such as electricity consumption conflict with government claims. Yet stock markets are pumped up just about every day by the central banks, not just in the US where criminal behavior is the norm. This divergence is not going to last. QE is a massive failure and I don’t see how disastrous consequences of this insane policy can be avoided.

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