The grand experiment is failing across the globe. Abe threw the Keynesian Hail Mary pass when he came to power. Now the ball is just bouncing around in the end zone, pathetically.
If you want to see what happens when the Keynesian virus truly takes hold of an economy and a society check out Japan. The once juggernaut of economic power, The Land of the Rising Sun, is now a great example of economic and social zombification as Charles Hugh Smith illustrates below.
It took 1 generation.
This is an important piece. Sometimes The Times runs some very good stuff and this is one of those times. The attached article is absolutely worth a read.
It seems that foreign governments, including Japan, Qatar, and Norway have been buying influence via some of Washington’s most prominent policy institutions including, allegedly, the Brookings Institution.
Japan had “a lost decade.” Then it had another. We are past the halfway mark of the American “lost decade.”
Keynesianism has failed utterly and completely. It’s not that there wasn’t enough stimulus. It’s that the concept of “stimulus” is bunk. It’s real “voodoo economics.” It is a cult. A dream. And as is increasingly obvious even to the Keynesians, a nightmare.
Abeconomics is a Hail Mary throw if there ever was one. Though many will argue otherwise there is a limit to “money printing.” Are we reaching the point where the system just starts eating itself in Japan? Very possible. If an increase in the sales tax meant to help pay for the gigantic Japanese debt does this to the Japanese economy they face a bit of a problem to say the least. Raise taxes, reduce revenue. Looks like Tokyo is way over the Laffer Curve. (And it appears to have done it with a sales tax, not even an income tax increase.) But even getting below the curve by reducing taxes is unlikely to help much because the debt black hole must be financed somehow.
This could be a good thing overall for China as the “alternative sources,” trusts, what is often called the “shadow banking system,” might actually be a stabilizing and limiting force in the economy. The rates of interest on loans through the shadow banking system are much higher than what municipalities can obtain through traditional lenders, and probably more accurately reflect the real risk of loans. (Which are considerable it appears.)
To paraphrase the anchor, – If a nuclear reactor melts down in your neighborhood and the government says “don’t worry about it” get the heck out of there as fast as you can.
… With the US on the same path but a bit behind.
You’ll remember that he was going to make the Fed more “transparent.”