Markets are pumped again today by the prospect of “helicopter money” in Japan. Bernanke visited Japan a week or so ago, and then Abe was re-elected by a large majority, based mostly on his warlike noises over Chinese territorial claims in the South China Sea. So Abe has taken this as a mandate to do what he wants. And he wants to do what the idiot Bernanke suggests, which is to simply print money and spend it. The concept behind “helicopter money” is that the central bank directly finances additional government spending. Practically speaking it is simply an acknowledgement that endless rounds of QE have left little in the way of securities for the Japanese central bank to buy, so the government will increase its spending to generate more debt.
This is supposed to scare away the demon deflation, according to Bernanke the scourge of plutocrats and governments everywhere. Actually, it will eventually work as savers will be crushed (although this has already happened, the savings rate in Japan, once a nation of savers, is now zero) and the private sector of the economy is being destroyed from lack of investment.
Venezuela is what happens next. Like Venezuela, Japan cannot feed itself. More than 70% of calories consumed must be imported, and the situation is deteriorating as farmers age. Unlike Venezuela, Japan is not self-sufficient in energy either. That is why it is re-starting the nuclear plants despite the Fukushima disaster. Japan’s trade balance doesn’t look too bad right now, because imports are falling far faster than exports as the domestic standard of living declines. But as the rest of the world slows, this situation will change.
The individual and collective insanity of central bankers is slowly but surely destroying the world economy. I guess we just have to wait for the inevitable riots, revolutions and wars.