The U.S. ruling elite needs to hear this warning from Japan (but probably won't listen) on the pain that comes with excessive macroeconomic stimulus:
The quickest way to get to that private sector de-leveraging is to let highly leveraged firms go bankrupt. American leaders think this is too painful to contemplate. China thinks otherwise, and is signalling its readiness to endure some pain in the short term:
I disagree with the article's contention that the world is heading out of recession. Most of the G-20, at a minimum, is still very much in recession but you wouldn't know that from the way governments dress up their economic statistics. Granted, the Japan article addresses fiscal stimulus while the China article addresses monetary stimulus, but the effects of either on GDP are comparable.
Nota bene: Anthony J. Alfidi is long FXI with (covered call options) and is short cash-covered put options on SPY.
“If you learn your lesson from the Japanese experience, you don’t remove your fiscal stimulus until private sector de-leveraging is over,” Koo, 55, chief economist at the research arm of Japan’s biggest brokerage, said in an interview at his Tokyo office last week. “When we see the private sector coming to borrow again, I’ll be the loudest person on earth arguing for fiscal reform. That’s the exit.”
The quickest way to get to that private sector de-leveraging is to let highly leveraged firms go bankrupt. American leaders think this is too painful to contemplate. China thinks otherwise, and is signalling its readiness to endure some pain in the short term:
Chinese officials may be preparing to reduce monetary stimulus that propelled growth to 8.9 percent in the third quarter and led the world out of recession.
I disagree with the article's contention that the world is heading out of recession. Most of the G-20, at a minimum, is still very much in recession but you wouldn't know that from the way governments dress up their economic statistics. Granted, the Japan article addresses fiscal stimulus while the China article addresses monetary stimulus, but the effects of either on GDP are comparable.
Nota bene: Anthony J. Alfidi is long FXI with (covered call options) and is short cash-covered put options on SPY.
