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Japan - Land of the Rising Sun Hyperinflation. Has the hyperinflation roller coaster in Japan already started?

No

After over 20 years of stagnation and deflation, the Japanese are trying to get their economy going again by printing money.  If it works, guys like Krugman and Summers will be vindicated.  If it fails, the austerity brigade will be vindicated.

It will be an interesting couple of years...

???
Am I missing something here?

http://www.forbes.com/sites/jamesgruber/2013/03/23/japan-is-the-real-crisis/

So, anyone want to place bets as to which currency gets to the "Cheaper to use directly as toilet paper than to buy toilet paper" stage first, the Dollar, the Euro, or the Yen?

All major currencies maintain inflation at around 2%. There is no hyperinflation in Japan, Europe or the US.

Yet.

No central bank will allow high inflation, the reason central banks gained a degree of autonomy was so that governments couldn't use it to print money for public finances and they could keep to a relatively strict inflation regime.

Thru dat. What's also interesting is that it will probably ramp up the global race to the bottom with many other countries having to devalue their currencies to keep up with Japan, if they're not doing it already. Get ready for precious metal to go up again, along with groceries. They'll keep trying to manipulate metal down, but not groceries though.

I hope it's dollars. I have more them than the others.

Also, a word of advice, wad up and unwad the bills repeatedly before wiping your ass. They're softer and more absorbant that way.

You sure about that?
https://en.wikipedia.org/wiki/Reserve_Bank_of_Zimbabwe

They are actually trying to create high inflation. People freak when they hear that, so that's why they come up with a bullshit target like 2% for us to calm ourselves with. It's already way higher than that. Inflation is hard to contain once it starts anyway, you can't just turn it off.

You can't compare Zimbabwe to a country with an independent central bank.

I'll bet you dollars that it is either yen or euros!

There are quite detailed statistics available for inflation, you can see by how far they miss or make their target. Look at either the CPI, RPI or GDP deflators.

:D

Check this one out:
http://www.shadowstats.com/

Also the CPI is made by roughly doing things like comparing the price of a new york strip 10 years ago to the price of donkey meat today.

Use a different measure then such as the GDP deflator which is based on consumption patterns. Any measure of inflation you make will have its flaws but they are roughly accurate.

Official GDP is bogus too. They're all bogus.

http://www.forbes.com/sites/afontevecchia/2013/05/15/volcker-government-makes-up-35-of-gdp-mortgage-markets-are-now-a-state-subsidiary/
http://www.marketplace.org/topics/economy/us-economy-grow-3-under-new-gdp-calculation

Can never satisfy people that believes in conspiracies, no matter how many facts you give them.

Where are you getting those "facts"?

Are you saying Paul Volcker is a conspiracy theorist?

Ok then, this one is straight from the FED website:

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=BOGNONBR&scale=Left&range=Max&cosd=1959-01-01&coed=2013-04-01&line_color=%230000ff&link_values=false&line_style=Solid&mark_type=NONE&mw=4&lw=1&ost=-99999&oet=99999&mma=0&fml=a&fq=Monthly&fam=avg&fgst=lin&transformation=lin&vintage_date=2013-05-17&revision_date=2013-05-17

What are you trying to say with this graph? that banks now have sufficient reserves deposited at the FED?

You can see from the FED graph that we might be ahead of Japan in the whole quantitative easing "solution".

One reason why we are safer from hyperinflation than Japan might be that generally Americans are too broke to borrow more money into existence, however if there comes a good asset bubble or two for the media to hype, then that won't last long.

The other is because of the dollar's global reserve currency status. However this is being threatened on several fronts, one of which is Iran selling hydrocarbons in currencies other than the dollar. This is the reason for most of the fear-mongering and hype is about Iran. I use this example to invite conspiracy theory claims, so that I might laugh at them.

You can get numbers for anything you want from any credible database, these numbers are not made up they are calculated in very specific ways.
GDP numbers are calculated using 3 different methods that all add up with very little discrepancies. Inflation can be calculated in many ways but the different calculation methods give very similar results. The methods of calculation can be a little difficult but they are very transparent.

With much of the population having 0 savings or worse, and having no access to dollars (euro/yen) no matter how many new ones are added to institutional balance sheets, it does seem difficult to believe that hyperinflation could take off.  But then again, I've never lived through such a thing so I wouldn't know.   Probably it always seems like it would be impossible until it happens?  Eventually these bonuses start getting spent, execs start dropping big tips and buying up more goods and services, and word gets out on the street or something?  Any insight appreciated ;)  

Instead of "sufficient", I might go out on a limb and say "inflated".

Also on a side note, look how hilariously dead broke insolvent the whole system was at one point.

Quantitative easing is a temporary measure and the central bank of any country in question can take money out of circulation in the exact same way once banks start lending again.

Recessions cause people to hold back spending which is why inflation goes down, if it gets to deflation then recessions tend to get much worse which is why temporary measures are often put into place to keep inflation just above 0.

The money then gets taken out of circulation again by the central bank selling off the bonds they originally bought and never reintroducing the money back into circulation.

I believe they call that "starting a deflationary spiral."

Yeah I'd say "very specific ways".

And I do agree they are transparent. That's how it's so easy to call bullshit on them.

One thing that isn't so transparent though is a lot of stealth inflation going on. Vendors are doing things like substituting horsemeat in hamburgers, faking honey and olive oil and the like. If you call me a conspiracy theorist, it will only serve to amuse me and cause me to chuckle somewhat.



The whole system is a broken down, dirty old joke.

If you have a better way to calculate the numbers you should write a paper on it, you would win a nobel prize.

Once again:
http://www.shadowstats.com/
A better way to calculate the numbers (actually, just the old way, that produces accurate results)

Those stats are laughable it suggests that inflation has been going up twice as much as wages in the last 20 years, which would mean we are a lot poorer than we were 20 years ago? That's insane to suggest that, production in real terms has gone up, not down.

edit: there is a reason why no one in academic circles listens to this nonsense.

The bottom rungs sure as shit are. I don't remember many "we are the 99%" protests from the '90's, do you?

Egads! You are truly hilarious, my friend.

I will not bust out a big ol' can of smartass on you though, because you are where many were, and many are.

This has been done purposefully on everybody. It's called brainwashing. It is a very active, almost irresistably effective campaign, made all the more so over the years by mainstream media companies all being mortgaged balls deep, just like everybody else, including "representative" governments around the world. Together they weave an almost impossible matrix of misinformation.

If you call me a conspiracy theorist, I will tell you that you are doing it because you are brainwashed to reject conspiracy theories out of hand, most likely due to the term's perceived connotations of ridicule, and therefore your argument has no weight, but I may be wrong. If I'm not though, just call them "coverups" instead for awhile, and then go look at a few. Nothing about reptilian overlords from planet X though, that one's probably not true.

Of course not. They're not from planet X.  ::)

You are correct. And they're not reptilians either. This is a concerted disinformation campaign, meant to keep us focused. They are really Amazons from Venus!!!

They can't. This is a one way street.

I don't see which sector of the economy has extra money that will be taken out of circulation by central banks? Certainly this is not the banking sector as all banks currently are under constant pressure to increase their capital.

Hyperinflation is not going to happen to the Yen. Period.

They can barely inflate it with their monetary policy.

Policies can (and do, surprisingly often) change.

True, but it would take some unprecedented policy to even come close.

Hardly unprecedented.
www.businessinsider.com/10-hyperinflation-stories-of-the-20th-century-2011-3?op=1

The measures that Japan would have to take being the 3rd largest economy in the world would be unprecedented. None of those examples compare to Japan.

1. Print money
2. Notice economy improve
3. Ignore "correlation ≠ causation"
4. Print more money

Which of those steps is unprecedented? Or is it just a matter of scale? If that's all you're saying, I agree. This has the potential to be the worst economic meltdown in history.

I just think there's a huge gap between them printing lots of money in order to inflate their currency and actually reaching hyperinflation. It's difficult for them to inflate the yen in general. The amount of yen that would need to be printed to reach hyperinflation would just be enormous.

That's kind of like saying a junkie with a high tolerance can't overdose because it would take too much of the drug.

This whole conversation is too soon.  Economics is not a science - if it was we would not have had the crash in 2008. 

The Japanese are trying a Keynesian pump priming exercise after 20 years of being committed to low inflation and a strong yen.  It started in December and so far is a huge success.  But it will be at least 2 years before we know if it fixed the Japanese economy.  If in 2 years time they are still stuck in the zero lower bound trap, Keynes, Krugman and the like will be making excuses. 

But if it works, all our governments will be trying to inflate our economies the same way and the Keynesian school of economics will be as strong as it was in the 50s and 60s.

Keynesian economics is about balancing the short term fluctuations. In good times you deflate to cool down the economy if its moving too fast and in bad times you attempt to inflate to get currency moving around.

This is called the "fleecing cycle"

+1

Yes, but neo-keynesian economics ignores the second part, "In good times you deflate to cool down..." Neo-keynesian economics are about balancing the short-term fluctuations, then noticing that your policies got your stock market buddies really rich with all the 0-interest money that got pumped into the S&P, then continuing the policies during and after the "good times," - or, having the good times never actually come, then make excuses as to why they never came, and continue with the failed Keynesian policies on and on until the inevitable happens.
What we are seeing now is not a Keynesian bubble it's a neo-keynesian bubble. Dow hitting all-time highs (not adjusted for inflation, of course) with no fundamentals behind it? Don't make me laugh at you again.

The fact that you are completely unaware of how inadequate the current inflation/etc calculations are is laughable. The fact that you are completely unaware of the alarming incidence of stealth inflation in food and consumer goods is equally laughable. What was said about NY strip to donkey meat is true except on a grand scale.

There is no conspiracy theory here, fred, dude. There are no green men from mars manipulating the inflation calculations so get those ideas out of your head. There are just men with failed policies trying to mask their failures with the "CPI" and other statistical embarrassments, and people like you essentially making the non-argument that "anything other than the official stats compiled by the good neo-keynesians is a conspiracy theory."

The Fed is talking about reducing quantitative easing, in very vague terms so as not to shock the markets. But there is no recovery and the printing (your beloved keynesian solution to short-term fluctuations) has not affected the unemployment rate which is its target. However they know that if they continue with no results, the end result will be worse than if they cut off the easy money.

There are valid arguments that CPI may understate inflation, but not to the level claimed on that website that was posted. You can see that CPI tends to be lower than both RPI and the GDP deflator, but only by a couple tenths of a percentage on an annual basis, not by 5%+ as some are suggesting.

Central banks tend to follow monetary policy pretty well, they have successfully kept inflation at low levels both in good times and bad without involving itself too much in economic growth, monetary policy is generally not the problem.

Where Keynesian economics fail is on public spending, governments are supposed to run surpluses in good times, however due to pressure from voters they end up doing the opposite leaving no room for deficits during recessions.

People tend to forget that in most developed economics the central bank is independent of the government.

The system has continuously degraded. It's a one way evolution that can't be reversed. It's an evolving, one way process.

The system degrades by way of bank bailouts. The major bailouts were FDR gold confiscate 1933 and repeg dollar per oz, Bretton Woods to make the dollar the world reserve currency instead of gold, Nixon abolishing gold standard totally 1971, and QE 2008 - 2???.

Each bailout has fundamentally changed the economic system and made it less of a "system". It's a joke now. There's not even rule of law. You could call the removal of "rule of law" for the financial elite the latest bailout.

You can't go back without chucking the whole thing and starting over at this point. The important thing to realize is that there is no more types of bailout available other than to let the system just burn up. As in, just arbitrarily print any amount of anything and call it "money". There is nothing left to do.

We are in new territory. We aren't in a place where you can apply any kind of phony, rosy, "this is how it's done to make all work like it's supposed to" mumbo jumbo. The moral hazard of the first bailout removed any kind of credible "this is how the system works" crap.

You could say the first "bailout" was giving a cartel of giant private banks the exclusive monopoly of issuing money in 1913.

Yet life gets better and better.  Its almost as the system needed to be degraded in order for us to have a pleasant standard of living.

Interesting that "independent" now means "balls deep."

Watch the Japanese Bond yields.  They are up 40% in the past week... if they continue to rise the extra interest due will suck up any extra capital that might lead to inflation.

The biggest problem for Japan is demographics.  They sell more adult diapers than baby.  They are faced with a mountain of debt and a declining workforce, I don't see a way out and neither does Kyle Bass.  If you haven't listened to his talk, it's worthwhile.

CHA-CHING!  That one deserves a bonus. :P

A couple of you other guys could get a job where hawker works or maybe you guys already work there?  :o

The average unemployed Briton today is better off than the average employed Briton was back in the days of the gold standard.  Like it or not, progress is real and if you want to say that something has been "degraded" to make it happen, then obviously that thing needed to degraded.

Is that a knock against the gold standard? I mean there are many many reasons things could have been worse back then than they are now.

Using "intelligent sounding words" (e.g. quantitative easing) is just hiding what is happening - printing money to stimulate an economy, which is a dangerous experiment. Economists say as much. These super artificially low interest rates are stealing money from savers and those savers, quite often, put their money into the stock markets to get a return. The banks are also funneling lots of money into the markets. It is a real life Ponzi scheme.

Is it worth it to experiment on an entire economy when it can go pop? How can globalization work when we have so many different cultural values regarding money around the world? Just look at the EU and the failures there (not to mention American "interventions" - Trillions in "overnight" loans to get around banking laws in America - starting last year).

Throw into the mix the naked short selling going on with Silver/Gold, we are making a dangerous recipe for failure.

Current level of indebtedness in Britain both public and private is at historical record. It is very easy (and silly) to constantly increase your indebtedness to show off some prosperity. The difficult part comes when you have to repay your debt but you can't produce anything that your creditor is willing to buy. Nobody is willing to pay for BOE pound printing press if it is not supported by North Sea oil. North Sea oil and oil-based British prosperity is already a history.

Unlike politics, history is a subject where facts matter.  As a matter of fact, the UK's current debt levels are low compared to the 1930s and the 1800s.  I won't bother comparing them to the huge debt levels that followed the second world war as that would simply embarrass your argument further.

Its a dig against the pointless pessimism that you spread.  Moving from the gold standard was a positive move.  QE has been a positive move.  The real "dangerous experiment" has been to see what happens when you let unemployment rise and keep it artificially high out of a fear of inflation.  So far the results have been poor.

Meanwhile the good news from Japan keeps rolling in: http://www.nytimes.com/2013/05/19/your-money/japan-starts-to-recharge-after-two-lost-economic-decades.html  

Pessimism? Hey guys, look at my post history. I'm very pro BTC and what it represents.

Don't confuse my optimism for BTC with my pessimism for Quantitative Easing.

Moving from a gold standard had a positive effect in many ways, namely liquidity. But there were many many bad effects. Most notably it got the country into huge debt and try to see if there is a connection with the all the wars. Remember John Kennedy put into action executive order 11110 to allow the US Treasury to coin and print money as the constitution called for. He basically told the private federal reserve "Why are we paying you interest? We should pay our selves interesst". And that is what he did. He put into circulation billions of US Treasury notes. They were pulled after his death. It would have gotten America out of debt. The world wouldn't be in the economic crisis it is in right now.

QE is just starting. Do you realize they can't just stop it (and raise rates) as it will pop by definition? Do you have any real idea what is going to happen. Did you just see the Cypress people get their funds stolen and gold raided? What is happening in Ireland, Spain, Italy, Portugal, etc? What is going to happen in Japan? Their stock market is shooting up but that is just giving false hope, just like in America - it will shift funds from banks (where interest is looooow) to the stock market - It is a Ponzi Scheme that can't be kept up endlessly. And when it goes it comes back down hard.

Your unemployment example I can agree with. But the numbers are fudged enough as it is AND people are working at lower paying jobs more and more. Much smaller issue as unemployment is a result of a lot of what these banks have been doing and set into motion.

Quantitative Easing is dangerous...

http://www.significancemagazine.org/SpringboardWebApp/userfiles/sig/image/ChampkinUploads/Zimbabwe_%24100_trillion_2009_Obverse(1).jpg

Yep, Japan is entering Golden Era...

When did the German economy go wrong?  In the 1930s under Brunning when they introduced austerity. 

A ponzi scheme implies that there will be a day of reckoning.  There never is one for a state - when a 30 year bond falls due, it issues another 30 year bond if it doesn't have the tax revenues on hand to settle it.

The difference between our opinions is that you seem to think that the statist economies will fail in their own terms.  I really don't see that happening at all.  Countries like Ireland, where I am from, are paying the price for leaving the state game and becoming subsidiaries of the European Union.  If Ireland still had its own currency, it would be fine.

The interesting thing about Bitcoin is that it can be a competitive alternative.  The Soviet states did not fall apart due to inefficiency.  They failed because their people saw that there was a better alternative.  Even the leaders thought that having their kids live in the West would be better than life in Communist poverty even though the Communist states were a great success in their own terms.  Likewise, currencies like the dollar are fine in their own terms but having your funds in Bitcoin is a way better decision in terms of future spending power.  That fact will change everything as more and more people become aware of it.

The German economy went wrong when their industry went wrong. Not German economists and bankers, but German engineers are guilty for Weimar Republic crisis and coming of Hitler on power! German engineers couldn't figure out how to make dynamically changing wheelbarrows to accommodate dynamically changing size of banknote bales necessary to be brought to the bakery to get a loaf of bread.

From Wiki - "A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme usually entices new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going.[1]"

This by all standards is the stock markets right now. Look at the US and now Japan. The stock markets are shooting up all the while productivity, income, etc. are going down. How is this even possible? It's because money is fleeing to the stock market because banks are not paying good interest rates and banks are further "investing" into them - all to support this policy which is just making shareholders richer. It can help anybody with funds in the market of course, but again, this thing will have to come down. We can't keep up this kind of policy as a long term policy. It is an EMERGENCY policy because of recent and past quantitive policies.

This is a Bitcoin forum and I just don't see you finding support for quantitive easing talk. Bitcoin is basically the savior of the problems those types of policies have created.

And also, you never addressed your first personal attack which was saying I am pessimistic (in general) and yet when you look at my posts it is clear I am Pro Bitcoin. You are trying to label me as something because I don't agree with you on quantitative easing, and you have ignored that.

Bitcoin is a better alternative...

Yeah, Detox from the inflation high is a bitch.

Don't ya think it might be wise not to start chasing the dragon in the first place?

ehehe. Yes, it is clear this wheelbarrow was not senior friendly.

http://www.arabianmoney.net/wp-content/uploads/2008/10/wheelbarrow-money.jpg

And this one was just not maneuverable enough. Really too big to bring a loaf of bread back on as well.

http://www.washingtonpost.com/blogs/ezra-klein/files/2012/08/weimar-mutilated.jpg

The Germans were unique in that they went for higher inflation than anyone else and then went for stricter austerity than anyone else.  The Versailles Treaty is the big factor in both. 

So, a little heroin is OK, as long as you don't overdo it? And if rather than going cold-turkey, you gently bring yourself off of it?

If only it weren't other people's lives that they're messing with....

Yes - used at the right time, heroin is fine.  Heroin was made as a therapeutic drug and when its needed, its fine to use it.  And the same is true of inflation.  If its needed, as it is in Japan, then use it.  When the need passes, stop. 

I can't see why you find that hard to accept.

Agreed. Ultimately, the real wealth of any nation is defined by the value of the goods and services it produces and consumes. If your economic policies lead to large portions of the able and willing working-age population sitting at home, then you are just wasting economic productivity and lowering your nation's standard of living (not to mention the social costs of unemployment).

We ought to be cutting taxes to let the private sector grow and higher more people and/or increasing govt spending to let the public sector hire more people (preferably for things like teachers and construction workers, and not soldiers or weapons manufacturers). Instead, way too many people are freaking out over inflation or the national debt and act as if they are threats to future generations. The real threats are if we let our society degrade through poverty/unemployment or if we don't invest enough real resources into education and technology so that future generations can be productive. Who cares if the debt in 20-30 years is $10T or $100T or what M1/M2/M3 are? What's most important is there there's an educated, well-off working class with state of the art infrastructure and technology at their fingertips.

The need never passes. Japan is already 20 years on heroin. The doze must be ever stronger with each year. It is a classic case of heroin junkie.

Except that the governments keep doctor shopping until they find one that will prescribe them infinite amounts of heroin, and the minute one starts to talk about lowering the dose, they fire him and get another. And God forbid a doctor comes along and suggests that Heroin isn't needed at all, that pain is natural, and it tells us when we're doing damage to our body, and we shouldn't just keep using drugs to mask the symptoms. That doctor gets laughed right out of the office.

Hmmm.  I have no idea what point you are trying to make. 

http://en.wikipedia.org/wiki/Austrian_School

Ah, that old chestnut.  "Hi I have an idea that is so bad no-one will try it and then I will spend forever crying that everyone ignores me."

Of course the junky is going to reject the doctor who tells him he doesn't need the drug.

Again, I don't get the point you are making.  The Japanese are able to borrow money for less than their inflation rate.  They don't have a problem with addiction to inflation - they have a problem with lack of growth and inflation is the correct way for them to get out of the situation they are in.

There is no junkie nor doctor in that scenario.  Just choices that can be made.

Inflation will fix their demographic issues? Their oversupply? I seem to have used the wrong product to compare inflation to:
http://www.diabetesmine.com/wp-content/uploads/2012/09/Snake-Oil.jpg

Let me say this in no uncertain terms:
Deflation is not a problem. It is a symptom. Treating the symptom does not treat the problem.

And in an instant Hawker started to question what he believed in...

That's your opinion.  The Japanese have a different view - that the persistence of deflation is harmful to their economy.  I think its worth at least 1 country in the world to try inflating their way out of that.  The experiment is 6 months old - it will be a couple of years before we can say if it was a good idea.

For centuries, people persisted in the belief that the sun orbited around the earth. Going so far, in fact, as to construct elaborate mathematical models to support that view. Didn't make it true.

You're wrong, neo-keynesians have the point of view that deflation is harmful to the economy, like with most self-appointed leaders around the globe speaking for countries I'm sure the Japanese people themselves will have very different opinions to that school of economic thought to what their leaders say, countries and people tend not to have one singular opinion about an idea even if they tend to believe in the same thing.

Heh. Unlikely. He's far too well brainwashed for that.

I'm happy to wait a couple of years and see how things work out for Abenomics.  Its you guys are all in a tizzying saying it can't work.

It is not any school. It is the common sense. It is old as the world!

Deflation is the natural cure for inflation. Deflation is caused by bursting of bubbles. Bubbles are caused by money printing. So if you don't want deflation stop printing money and stop encouraging speculative behavior of large masses of people. Ordinary people are penalized if they save their money in a bank so they go elsewhere creating bubbles in housing and stock market. Without savings there is no capital. Without capital there is no capitalism. Simple as that.

https://i.imgur.com/kFIWDbz.png

The problem with that argument is the long periods of deflation in the 1800s when the currency was gold.

This is the root of your difference in opinion.  You believe there is infinite demand for government debt.  Remember, the bond markets are still markets.  If demand dries up, interest rates will rise.  Unless the central banks can increase demand for bonds without paying more interest, they will be in trouble.  Watch Japan...  the 5 year interest rate jumped up 38.9% this month, most of it in the past week.  This is after then yen fell roughly 30% in the past 6 months.  Demand is leaving bonds, and unless they tighten and strengthen the yen in the near term the long term result will be higher interest and thus deflationary pressure as more profits are needed to service the debt.

That is a good thing!  The Japanese state will be forced by the markets to borrow less and the Japanese consumers will be encouraged to spend more.  That's exactly what you would hope to see happen.

There is no problem at all. You have read something somewhere but failed to understand what it is...

The supply of gold is not even throughout the humankind history. One such period, when there was an increased supply of gold and silver, was the period when Spanish conquered Latin America and English successfully liberated North America and Australia from their native inhabitants. In longer period gold and silver supply is always steady because it naturally balances itself. Read, buddy! Read! You have a lot to learn.

Still seeing deflation as a necessarily bad thing, huh?

No - replying to the post saying that deflation is a result of money printing.  I have an open mind on deflationary currencies in a world where there is a choice of currency.  In a world where there is only 1 legal tender, then yes, deflation is very bad indeed. 

Well, there's your problem. Legal tender.

And that's why we are here...we have an alternative in Bitcoin that might be the most disruptive innovation of our lifetimes. 

Indeed. A currency completely shielded from government force. A currency incapable of being influenced by Keynesian policies. It's going to be amazing.

I see it like having a ringside seat on history :D  What if the Japanese who are currently hoarding Yen take it into their heads to hoard something else?  Abenomics isn't just an interesting experiment for economists - it might give us an insight into one possible future role for crytpocurrencies. 

Obviously if capital leaves the bond market it will be invested elsewhere, but this does not necessarily mean consumer spending.

Relax everything this means Manga sales with skyrocket in the coming future  8)

In a gold - or other stable monetary system - economy, deflation is an indication of economic growth. Specifically, that the economy is growing faster than the money supply, and therefore the individual monetary unit is growing more valuable as it represents more real wealth.

Still think Japan's deflation was a problem?

The confusion comes in because "the economy growing faster" is usually due to automation driving down labor demand.  If you keep your job or have lots of cash, deflation is great.  But, deflation is accompanied by a very tough labor market.  However, if it is a reliable feature in the economy, people learn to use it to their advantage by saving.

[citation needed] especially given my (admittedly anecdotal) experience in an inflationary economy that the job market sucks.

I agree.  Its an experiment.  It overthrows everything the Japanese MITI has stood for since the 1950s.  It should fail as Japan has a demographic issue that can't really be fixed. What they are doing is locking themselves out of the international bond market and encouraging Japanese to stop hoarding Yen.  In 2 or 3 years, we will know if its been a worthwhile innovation.  

One interesting idea is that a lot of the hoarded Yen might be converted into Bitcoin and gold.  Both are perfect for a population facing a government that is forcing inflation on them.

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

Chapter 1, beginning with "Of the Wages of Labour"

Admittedly rooted in sound money economics, which may not directly apply to modern reality.

Could you point out where it states that "In an economy where the value of money is increasing, labor is in small demand"?

'Cause I don't see it.

eeheh, Love the pic. But are you sure we shouldn't just give the Quantitative Easing a couple of more years to see how it works out?

As long as Japan is in deflationary territory the Bank Of Japan can freely purchase bonds to drive down yields.

I'm not sure about those summaries, I would read the source material.  Anyway, it is not always correlated because deflation doesn't cause a tough labor market.  However, both can be triggered by increasing productive capacity caused by automation replacing human labor.   And it used to be that this was the primary cause of deflation

Japan is NOT in a deflation territory! All official data about inflation there is excluding price of food.

Thank you.

Automation can sometimes cause a tough labor market (in the industry undergoing automation), but that's not the same as deflation causing a tough labor market.

Japan is a very strange country as it's basically a vassal state since the USA wrote their constitution after WO2 (which is still in effect) making it unconstitutional for Japan to wage war. For the last ten years or so people are starting to increasingly loudly question the constitution. It will be interesting what happens in the next ten years.

http://en.wikipedia.org/wiki/Article_9_of_the_Japanese_Constitution

That's false

http://www.stat.go.jp/english/data/cpi/1581.htm

Correct.  I never made that claim.  The quote above is taken out of the specific context of automation-induced inflation that I framed it in originally.

And the JSDF is pretty much a joke, from what I hear.

I bet on the US

Their weapons grade uranium is not a joke.

Could be a safe bet because the smallest Yen paper bill is 1000 (~10 USD today), and the euro has similarly valued smallest paper bill. 

Those coins could be rough. On the upside, they're reusable, just wash 'em off.

http://www.thedailybell.com/29131/Easing-Policies-in-Chaos-After-BIS-IMF-Attack

some decent stuff in its comment section too

Japan is insolvent, but please don’t worry…

http://nipponmarketblog.wordpress.com/2013/04/25/japan-is-insolvent-but-please-dont-worry/

The US has been insolvent for a while now.  Once we can't prop up the FRN by driving the global oil trade, we'll see hyper-inflation.  I'm betting the Euro will crash first, though.

This lady has been putting out nice updates about the Japanese situation:

http://youtu.be/AR3TyfKTeNE

TL;DR; Parasitic rich investors/hedge funds are using near-zero interest rates to borrow from Japan and buying high-yield assets (carry trade) like the european bonds. This will suppress the prices of non-yielding assets like gold and yen and add to the housing/bond bubble. However, there's a high risk that sometime in the near future people will stop accepting the rapidly declining yen and stop buying Japanese Goverment Bonds(JGB) because the yield/risk ratio is off. This should trigger:

  a) hyper-inflation if Bank of Japan(BOJ) continues easing and buys even a bigger share of JGBs
  b) dramatic increase in japanese bond yields (interest rates) that would pretty much destroy the japanese economy that is already spending a large portion of their GDP on interest payments

Bonus: Japan has been the biggest external buyer of US Treasury Bonds(T-Bonds). Once the shit hits the fan domestically, they probably have to stop this. This means that T-Bond yields will increase -> interest rates will increase and the same scenario could take place in the US.

Well basically, none of what you said is true, or accurate, in the causal sense, or in the layout of the factors of the situation.

All the major currencies are sinking together, the effect of a dramatic drop in one is similar to poking your finger at an inflated balloon.  The effects are seen in the overall dimensional space, which is not linear a-->b event space.

Feel free to make your own predictions. Just saying E=mc² or talking about "overall dimensional spaces" doesn't add any value to the discussion.

I've got a few related questions.

In general, isn't practically every country, hence the world, in a giant bond "bubble"?

How is it that yields are so low when risk of default is at least perceived to be so high due to the sheer, hulking, clearly impossible amount of the debt itself?

Doesn't the fact that everybody can plainly see the debt growing hyperbolically contribute to the bubble popping risk of the bond market where yields skyrocket one day?

What happens when it pops, like all bubbles do?

What else can happen besides instant default and collapse?

Is all this money printing supposed to keep this bubble from popping in the first place or is it intended to somehow make it magically not catastrophic when it does pop?

If it somehow never pops and the money printing is done and it "worked", is not everybody's taxes going to be like 20 times their income in order to just service the resulting amount of debt?

All G7 countries, yes. (Well, other countries too.. But I think you get the point)


The yields are artificially low. In US and Japan, the central banks are buying ~70% of all newly issued bonds


Yes, but as long as the music doesn't stop you can make big bucks by taking near zero interest loans and invest them in high-yield bonds like Italy/France. Also, if yields start going higher, inflation will increase too. So if you can lock-in with these low rates, you can pay the debt back with cheaper currency.


I think that people will stop trusting the Fiat currencies, which are (backed by) debt.


The debt slavery and austerity will continue and worsen, before people stand up and demand the banks to take responsibility and more equal incomes overall.


Yes, QEs are keeping the markets alive but what if FED/BOJ can never pull out?


Well it depends.. EU is vowing to end tax evasion, US seems to be heading the same way (Apple). Recently 200GB of tax haven data was leaked, still waiting for action based on the evidence. In a very unlikely scenario, the tax evasion might be stopped and that could cover a massive portion of the deficits.. but I think that it will more likely trigger hyper-inflation (so far we haven't experienced inflation, because while money supply has increased, money velocity has taken a nose dive. If the big money starts to flee from tax havens -> increased velocity -> inflation hits main street).

It's really happening right now.Bitcoin "Jesus"will be busy ;D
http://www.bloomberg.com/news/2013-05-31/apple-raises-prices-for-some-products-in-japan-on-yen.html (http://www.bloomberg.com/news/2013-05-31/apple-raises-prices-for-some-products-in-japan-on-yen.html)

I am sick and tired of these hyperinflation people constantly getting my hopes and dreams up only to have them crushed time after time.

You see, I have a significant tax debt from some mistakes made long ago. Every month I make payments but it will be years before it is paid off.
However, if we experience hyperinflation and the value of the dollar starts dropping 50% per month. Then my debt will simply be inflated away. I can pay it off with pocket change.

I will then rest easy with my bitcoins whilst watching the world burn.

So, unless you people truly see inflation getting close to that 50% per month mark (which is the definition of hyperinflation) Then stop saying it is just around the corner. Because all you are doing is crushing the hopes and dreams of people like me and millions of others who want a way out of their debts to Uncle Sam.

And your story (and the millions of similar stories) is exactly why they won't let hyperinflation happen.  Bankers will always prefer deflation, since that gets them paid back.  There will be some defaults, and they won't get it all back, but prices fall and what they do get back can be reinvested at bargain rates.

This is not the general accepted definition.

This is the right one:

Well, that does not really satisfy my Zimbabwean envy.
But I will take 100% in 3 years if I can get it.

You won't get it (at least not this decade).... start making plans for this reality. (although a small hedge like pms and/or bitcoin never hurts)