Yen As Wakizashi

Yenby Cato   11/2/14
The central government in Japan borrows ¥40 of every ¥100 it spends.  Sovereign debt now equals 260% of ¥GDP.  Total debt, including corporate and individual debt, exceeds 600% of ¥GDP.  Japan is demographically the oldest and least fertile nation on the planet.

The Bank of Japan (its version of the US Federal Reserve) has just committed to buying 100% of 2015 new sovereign debt.  And presumably 100% of 2016 and 2017 and 2018 issues as well.  This is called “monetizing the debt” and is always self-defeating.  Like a snake eating its tail, at some point the process becomes internally paradoxical and collapses.  From Weimar to Zimbabwe history is clear: sooner or later failure is certain.

One analyst with 30 years trading foreign currencies opined recently that if … when … the Yen hits ¥120 to the $US1.00 (it’s currently about ¥112) it will spark a new “currency war”; a new race to the bottom, forcing China, the US and UK, and the Eurozone to respond in kind to defend their export industries.  So if … when … Japan becomes a failed, bankrupt state they will not go that road alone.

Keynesians are openly cheering this “bold, aggressive” move by the BOJ.  They praise Japan’s economic wisdom.  This represents precisely the approach they are demanding of Germany and the ECB in the Eurozone; the ending of which in the US and UK Keynesians are jeering.

I think, however, that the motive behind the BOJ’s action is not economic but cultural.  The Japanese have a tradition of ritual suicide when the path to victory has closed, when defeat is eminent.  It would appear that ritual is alive and well, though now employing Yen rather than Wakizashi.


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6 Responses to Yen As Wakizashi

  1. Timothy Lane says:

    I read of a story that circulated in Germany after the Weimar hyper-inflation of 1923. It seems 2 brothers had inherited sizable sums from their father. One invested it wisely and carefully; the other spent his on a fine wine cellar (except he drank it up almost as fast as he bought it). But then the hyper-inflation made the first brother’s investments worthless, whereas the second had never gotten rid of all the old wine bottles and thus still had a useful asset that enabled him to get by. The Krugmans of the world evidently want to see a return to that sort of improvidence.

  2. Rosalys says:

    I can’t decide whether the “experts” of this world are really idiots or just Satanic. Some of each?

    • Cato says:

      Neither I think. Much more prosaic than that. If you’ve devoted your political or academic life to a fallacy, you will nonetheless be very reluctant to recognize that fallacy even when it becomes impossible to ignore. Power, position, money, influence … being recognized as an expert with all the glory that brings … all have a way of stripping away intellectual integrity.

      • Timothy Lane says:

        This is made worse by the fact that liberalism (which so many of the experts worship) is based on the assumption that the liberal elites are morally and intellectually superior — indeed, perfect, so that there can be no legitimate reason to oppose them.

        • Cato says:

          My grandfather saw me preening one day, still an awkward teenager then, and told me “if you have to proclaim your manhood you don’t have any”. Pretty much the same with those constantly telling us how superior they are. The usual follow on, to every failure, is that it’s always someone else’s fault.

  3. Brad Nelson Brad Nelson says:

    The Japanese have a tradition of ritual suicide when the path to victory has closed, when defeat is eminent. 

    Not just the Japanese, but many aspects of the West look like a scene right out of Doctor Strangelove with Slim Pickens riding the bomb all the way down. Europe is riding on top of a multiculturalist bomb that will explode in the form of demographics. America and other countries are riding the bomb of Leftism. I’ve never seen anything quite like this kind of mass psychosis.

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