In the long run, as John Maynard Keynes so infamously observed, we are indeed all dead. And in the long run, moronic economics, like those promoted by Mr. Keynes (with apologies to morons, not that any read SLL), lead to collapse. From Charles Hugh Smith at oftwominds.com:
Japan has proven that decay can be stretched into decades, but it has yet to prove that gravity can be revoked by central bank monetary games.
Japan’s fiscal and monetary extremes are in the news again: this time it’s the Bank of Japan’s extraordinarily large ownership of Japanese stocks, a policy intended to boost “investor sentiment” and prop up sagging equity valuations:
The Tokyo Whale Is Quietly Buying Up Huge Stakes in Japan Inc.
The core failure of Japan’s central bank and state is they have attempted to substitute monetary games for desperately needed social, political and economic reforms. This is the Keynesian ideology and project in a single sentence:
Keynesian policy holds that expansionary monetary and fiscal policy can be substituted for structural social, political and economic reforms, enabling the status quo to retain its power and privileges without disruption.
In effect, Japan has pursued a vast monetization campaign for 26 years. The Bank of Japan creates money out of thin air and uses the free money to buy government bonds, funding the state’s enormous fiscal deficits (also known as monetizing government debt). The BoJ has extended this monetization to corporate bonds and the stock market– effectively propping up government debt, corporate debt and the stock market with newly created money.
That these were once private-sector markets has been set aside, as the only thing that matters now is keeping them propped up, regardless of the cost. As I note in my new book Why Our Status Quo Failed and Is Beyond Reform, when emergency measures become permanent policies, you know the status quo is on life support.
To continue reading: Lessons from Japan: Decades of Decay, Unavoidable Collapse
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