Tuesday, April 5, 2016

Keynesian Leaches


There was a time when doctors would prescribe leaches for certain health problems.  When it did not work they often just increased the dose, with more leaches.   Often the leaches would kill the patient.  The Keynesian economists today do a similar thing.  They prescribe money creation.  When that does not work, they prescribe an increased dosage of money creation.   Eventually the patient, the economy, dies.

14 comments:

  1. Hi Vincent, the price of JGBs are starting to look more and more exponential. Extrapolating the current curve would indicate some type of reversal would happen within a few months. Does this tell us something is up with the yen within this timeframe? Any opinion? This chart is what makes me keep a short position in the yen.

    https://www.tradingview.com/chart/gmHBCeNk/

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    1. I don't really do chart analysis. I can't say when things are going to move just that it seems a positive feedback loop could start at any time. Honestly, I did not think it could go this long without starting.

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    2. Maybe it'll go another 50 years without starting. But at some point you have to start questioning your model of reality don't you?

      This is interesting: Swiss yield curves negative out to 50 years:
      https://twitter.com/Schuldensuehner/status/749131071003000832

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    3. Tom it can't go on like before for another 50 years, that's for sure. Something has got to reverse. There's a limit to how low interest rates can be pushed down. Looking at the bond charts it looks to me like they are going to top out this year. So it is probably close to that limit now but from that point, probably this year or next, whenever it is either the Yen will start to fall or the government has to turn the deficit into a surplus and start paying back. Bonds cannot be the coushion much longer.

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    4. Dan, are you saying that if it does go on for more than two years, then your hypothesized mechanism will be effectively falsified?

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  2. Vincent, Sumner posted a Japan update:
    http://www.themoneyillusion.com/?p=31868
    What's yours? It's been a while since you made a post here? Have you gotten bored with this blog?

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    Replies
    1. I still think Japan will get hyperinflation. I was very curious about hyperinflation. This blog was for posting things whlie I looked into hyperinflation and getting feedback while I figured out how it works. I very much appreciate your feedback by the way. I am content that I now understand how it works and think I have explained it. So don't have much else to say on this topic. :-) I am off to work on solar boats. See http://www.islandboys.ai/ which should get more posts going forward.

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  3. If Japan goes 50 years then I would have to admit I was wrong. I don't think any other country has lasted as long as Japan in terms of Debt/GDP, spending/taxes, and percentage of debt monetized without getting to high inflation. At the moment Japan looks like the exception to the rule. I think that will change. Time will tell.

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  4. Any new hyperinflation predictions Vincent?

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  5. https://twitter.com/Noahpinion/status/893528163518566400/photo/1

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  6. http://andolfatto.blogspot.com/2017/08/a-monetary-fiscal-theory-of-inflation.html

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Looking for polite debate on ideas. Never attack a person. Be nice.