At the breakneck pace global inflation is being expanded, it’s difficult to keep up with the Goebbels-inspired “lingo” utilized to mask it. No better example of “financial understatement” is the term quantitative easing – in reference to money printing; along with Long-Term Refinancing Operations and Term Asset Relief Programs (i.e. TARP) to describe bank bailouts – among countless others. In fact, I last year wrote of the rapidly approaching NIRP, or Negative Interest Rate Policy stances – which numerous Central banks have recently contemplated or, in some circumstances, implemented. One has to be atop these things constantly, as such currency-killing acronyms and abbreviations are emerging at a breakneck pace.
Yesterday, I spoke of how institutions are starting to fear that the BOJ’s “quantitative qualitative easing” program – i.e., doubling Japan’s money supply within two years, and using the proceeds to monetize 70% of all JGB, or Japanese Government Bond, issuance – is failing. Not a surprise to anyone utilizing common sense, as nine QE rounds – and a ZIRP, or “Zero Interest Rate Policy” – spanning 20 years has failed to foster anything meaningful except inflation; causing Tokyo to be ranked the world’s most expensive city since 1992.
Shinzo Abe became Japan’s Prime Minister in September 2006 – as now, presiding over official “deflation” but real inflation. His QE and ZIRP policies failed to move the stock market higher; and thus, out he went after just one year. Amazingly, after five more years of economic misery, he was re-elected in September 2012; this time, under a platform of far more aggressive money printing. Thus, “QE8” was launched within days of his election; and when that failed to move the stock market higher, “QE9” a month later. Two months later, the Nikkei had barely moved, so he started talking up the newly coined “quantitative qualitative easing” – and Voila; the Nikkei finally ignited, rising more than 50% by May 2013. The economy itself remained at stall speed, whilst inflation rocketed higher; but who cares, as the bankers receiving such subsidies were on Easy Street. And oh yeah, the corporations “benefitting” from the weaker yen – i.e., generating higher profits, but in a depreciated currency.
Quantitative qualitative easing was in fact launched in early April; but as you can see, the Nikkei topped shortly afterward – and subsequently flat-lined for six months. Throughout this period, government propaganda of how “QQE” was working was deafening; culminating in the “wildly bullish” 0.9% GDP print in the second quarter – replete with fictional negative price deflator. Unfortunately, as the global economy has continued to weaken, Japan’s fraudulent economy couldn’t live up to the Nikkei. And thus, when it was reported last week that third quarter GDP growth – again, with a negative price GDP deflator – fell to just 0.4%, panic set in that QQE wasn’t working.
And then, like magic, “rumors” of additional QE emerged; as amazingly, Shinzo Abe’s Bank of Japan has trapped itself in a situation where economic growth or not, QQE’s success is being judged by stock market performance. Someone apparently hasn’t told them of 2013 Venezuela, 2009 Zimbabwe, or the 1923 Weimar Republic. Subsequently, the “ultimate insider” – i.e., Goldman Sachs – was the first to report the potential for outright BOJ equity monetization; which by my deductive powers, will be titled “QQQE,” although I can’t comprehend what the third “Q” will stand for. If this actually occurs – amidst what the government purports to be economic “recovery.” This frankly, is no different than what Janet Yellen last week did when she endorsed indefinite QE amidst the trumpeted U.S. “recovery”; and Mario Draghi a week earlier, when the ECB lowered its base rate to 0.25% – again, amidst the ubiquitous European “recovery?”
This brings me to the “abbreviation du jour”; which although first discussed 18 months ago, is finally entering the mainstream. For lack of a better description – is NGDP, or “Nominal GDP Targeting.” Surprisingly, it’s a bit less deceptive than TARP or QE. Nonetheless, it will be equally lethal to a nation already amidst the throes of rampant inflation; as by definition, it involves utilizing “hyper-monetary” policy – including conventional tools such as interest rate targeting and open market operations – and unconventional tools, such as quantitative easing or adjusting the interest rate on excess reserves. In other words, an all-outmoney printing assault, targeting higher inflation like a heat-seeking missile. Frankly, it is astonishing that Japan’s financial markets have not collapsed by now, at least in real terms; but rest assured, such measures will eventually attain the “desired effect,” by hook or crook, just as occurred in Venezuela, Zimbabwe, Weimar Germany, and hundreds of other situations throughout history – such as these 27 in the 20th century alone.
To conclude, all I can say is this. If Japan does indeed initiate some form of NGDP, the odds of what I wrote six months ago – in “The Real Yen Bomb – Starts Now” – will increase exponentially. Not to mention, the subsequent debasing moves by the entire world’s Central banks – now that “The Final Currency War” has begun. Under such a scenario, how can you not protect your financial assets with the historic wealth protection that only physical gold and silver have provided?
