Thursday, May 23, 2013

Abe stimulates the world

Shinzo Abe, the current prime minister of Japan embarked on a program of intentional depreciation of the Japanese Yen last December. The program has been referred to as "Abe-nomics",

and here.

Since that time the U.S., and to an even greater extent, the Japanese stock market has been on a tear.

An intentional depreciation of a currency makes loans made in that currency easier to pay back with those currency units as they will be worth less in the future. This makes it a no-brainer to borrow now and pay back later. This, and the co-incident rise in the U.S. stock market makes me think that our stocks have been bought more for speculation with easy money than on a belief in the fundamental strength of our economy.

The charts show a correlation.....

Correlation does not insure causation....but....
What happens if the bond market in Japan sells off and interest rates go higher than the 0% of the past few years????
The next black goose?


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