I’m BBBAACCKKK!

Let’s talk about Abenomics. You surely know from previous posts that Shinzo Abe (spelled with either an “e” or an “i” in his first name – take your pick) has created a very different economic rubric (love that word! also ref: protocol) for Japan. The government is spending over 7.5 trillion yen a month to flood the country with yen and effectively devalue their pre-existing debt. Ref: Helicopter Ben’s QE-infinity.

Why did he do this? Deflation has been a nagging problem in Japan for two decades. While deflation is good for old folks, it hasn’t been good for the next generation – the last generation that stands between the old folks and destitution. Abe’s obviously gotten a new financial guru to say that this is not sustainable, and that Shinzo must buck the system and change the economic climate in Japan. With much fanfare, the Abe government announced these plans, and then strong-armed the Bank of Japan into cooperating with this strategy.

What’s the result of this? The Nikkei Dow has risen from around 8500 in late October to over 13,000 today. At the rate it’s increasing, it will surpass the all-time-high Dow Jones Industrial average within the next 6 months – maybe earlier. Is that a good thing? Depends on who you ask…

Old timers like George Soros hate the concept and he predicts a dire end. I begin to think that if you make George Soros unhappy, you’re probably on the right track, as he benefits from government stupidity. Others – like my favorite columnist Ambrose E-P, says that Abenomics is the only alternative for Japan. So only time will tell who is right and who is not!

Where did Shinzo get this idea – did he invent it? Nay, nay – his financial guru obviously followed the work of Korekiyo Takahashi, the Finance Minister of Japan from 1927 until his death at the hands of young military officers in 1936. Those officers assassinated Takahashi for cutting the military budget. Cardinal sin when you have plans for global domination, eh?

Takahashi dealt with the Great Depression by flooding Japan with yen. The resulting boom in business increased tax revenues and saved Japan from the misery inflicted on the rest of the world, which insisted on sticking to the gold standard. That is effectively what Abe believes will occur as a result of his administration’s actions. Apparently stock market investors agree with him – otherwise why would the Nikkei have nearly doubled in the past 6 months? According to AEP, it takes two to four years for the full effects of this type of easing to be fully felt. It took three years for Takahashi to succeed in his gamble.

So for the thousandth time you ask: what the devil does this have to do with anything? Why, oh why are you so obsessed with the topic of Asian economics?

My somewhat vague responses in the past have been about global village and what affects the rest of the world affects us. You never really liked that answer, didja? OK, so why else, you query? Well, to be perfectly candid, it’s a question of trust.

Trust? Yup, or better phrased: who do you trust?

It’s easier to say who I don’t trust in matters relative to American economics: just about everybody. Nobody is immune from spin these days. You cannot read anything without wondering which side of the political divide the author represents. Alternatively, you wonder, who are they shilling for? So with all the information available on the internet, where can you go for the straight scoop? Nowhere. So what do you do? I rely on a couple of authors – you know who they are – to tell me what I want to know, and then – by extrapolation – I can assess the situation for the U S of A. A bit tortured, somewhat oblique, but hey – that’s me…

OK, you respond – so extrapolate away! What’s new & different? You say buy a couple houses – check. You say grow a garden because inflation will affect food prices, check. Is that all there is?

Aha – back to soothsayer status…get that pic out… okay – new Oraclular predictions…

Here goes. First some facts: The Dow is at an all time high. Unemployment is dropping, albeit slowly. Core inflation is running at about 2%, so nothing to be concerned about there. Washington is beginning to work together to solve the nation’s problems of gun violence and immigration. All good so far. But what about things that aren’t so good? While shipping stocks are up, they’re still off by ‘normal’ standards by 70 or 80%. The Baltic Exchange Dry Index is rising, but still stands at less than a thousand. Commodity prices are dropping – including gold. So what does all this add up to?

Here it comes: nothing. The next couple of years – thru spring of 2015 – we’re gonna just bump along. We’ll have a few ups and a few downs, but nothing substantial. The economy will slowly begin to pull itself up and become sustainable. Sorry to be so dull, but actually – that’s really good news! Because the European Community will not be calm at all. The EU will suffer mightily in the same time frame, on their way to a big blowup with hard feelings and recriminations all around. In my humble opinion, the next serious world-wide conflagration will arise from the misery inflicted by this experiment-gone-bad called the European Union. Rest in peace, Maggie Thatcher. You were right all along. But as with most people who are right (Abe Lincoln, Mahatma Ghandi, Korekiyo Takahashi) you are punished for being a strong leader in your lifetime. So expect to see lots of unhappiness coming from the EU due to lack of that kind of leadership. But when a leader does emerge – watch out…Think Adolph Hitler, Benito Mussolini and Tojo…war is not going to be small or pretty, but it is inevitable. And when it occurs, who will be the big winners? The U.S. and China…you heard it here first.