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.
So the I guess the Fed needs to start thinking about cutting rates right? No one can afford monthly payments because rates are too high right? But they are as low practically as they have ever been you say? Uh oh, what does that mean?
Don’t be. Government reporting tricks will make it all better.
Really we’ve been bumping along the floor for a very long time. Much of the American economy is still mired in the “Great Recession.” Many people don’t even remember what organic prosperity looks like.
Unemployment (the official unemployment number) keeps going down bit by bit because people are dropping out of the workforce not because people are newly employed.
We’ve written about this in the past. The most important industry in the USA, also the least regulated (go figure) is tech. Technology companies thrive on innovation and beating each other to market. Historically tech, based on the other side of the country from Washington DC, has been a fairly free market. There is a reason why the price of computing comes down every single month and the quality goes up. The power the average person holds in his or her hand when they glance down at their iPhone is well beyond what a computer the size of a city block could do a generation ago. This is because of a relatively free market and very limited government influence.
If the government is spying on the communications between individuals, companies, and governments to gain informational advantages in trade negotiations, general law enforcement, “homeland security,” and nearly everything else, the chilling effect on the overall economy could be profound.
China is coming to grips with economic reality increasingly. The numbers coming out of the PRC, long suspect, are now widely regarded as being very optimistic. China may be going through its first recession in 30 years, but we don’t know because the data is dung.