We’re talking Japan of “the lost decade” (now a couple of decades old). We harp about markets and government intrusions here and explain why they’re almost always “a bad thing”. Well, this is about market intrusion on a grand scale:
One of the consequences of all the stimulus and subsequent QE is that long time traders of our markets know they are screwed up. Consistent printing of money and 0% interest rates world wide have created their own economic imbalances. As the saying goes, there is no free lunch.
Economists such as Taylor, Cochrane, Zingales, Rajan and Murphy have said as much over the past four years. Turns out, they were right and the Keynesians are wrong.
The government stimulus had a multiplier effect of 0. It did nothing for job growth or GDP growth in the US. Combine the inefficiency of US fiscal policy with the continued implosion of Europe, and you have a world wide malaise. In China, because of macro economic effects, wages are rising, costs to produce are increasing. Companies are also wary of both the poor property rights system and the lengthened supply chain. China is slowing down.
Remember all the talk about the multiplier effect of the stimulus? Yeah, disregard.
Meanwhile in the rest of the world the effects of all these market intrusions/manipulations are having their effect.
As the title says, we’re all Japan now.
Thanks, government(s).
~McQ
Twitter: @McQandO
