Minyan Mailbag - Japan Experiment
Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.
This article was recently brought to my attention (by Minyanville, if I recall correctly):
I will spend some time with it over the weekend, and at first blush it seems plausible enough (passes the "smell test"). I tend to like to "fact check" articles such as these. I do not "know" the author. I see no footnotes, and the charts are all "home made" (as opposed to a government or other "verifiable" source). I have no experience finding data on the Japanese economy - do you have any suggestions as to how one might verify some of the statements in the article?
Secondly, how do you feel about the statements made (plausible ?), and your reactions, please.
The process that Duncan describes certainly did not go unnoticed by all, especially here at Minyanville. This unprecedented economic experiment has been described many times by us.
What the article did not describe is the risks involved in such an undertaking. Some have argued that such steps were necessary and worth the risks. Perhaps this is true, but I don't believe so. Anywhere along this path things could have (and may still) go wrong, for I do not believe that "printing of fiat currency" is a solution, especially when that supply is not directed at productive assets, but merely inflating the price of assets. Real income generation has been lost.
The risks caused by the by-product (debt) of such a strategy remain and grow ever increasing. The instrument of causation grows ever duller: it takes more and more debt to produce the same dollar of gdp.
The "risks" have so far not turned into real losses of capital, but these risks remain.
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