Japan Eases and Tightens, Kamikaze Style What Happened to Truth Social? Economic policy in Japan is very confusing. My favorite “inflation is transitory” macro economist, the Jesus of macro, David Zervos, has new commentary about Japan’s latest monetary policy stance. To quote David, “Engaging in straight-up QE, while raising rates, is something completely different. It’s a highly incongruous policy mix I believe we have never seen before.” Yes it’s strange, but Japan’s central bank, the BOJ, has been buying their own government debt and public equity market for so long we all forgot they were still doing it. They now own 53% of their own bond market and are also the largest shareholder of the Japanese stock market. They have no plans to stop buying as they raise interest rates. David, who has never met a central banker he doesn’t like, thinks it might be a good idea and maybe we should try it. I am not sure what to think? It’s always seemed to me that the BOJ was engaged in a kamikaze economic policy. If they buy all of the government debt, does it matter? If they do, what’s their debt to GDP ratio, zero or 250%? David believes that the U.S. Fed will stop QT when they start easing in June. If the Fed maintains a very large balance sheet, what is the U.S. debt to GDP ratio, 97% or 120%? Do high levels of government debt even matter if central banks buy most or all of it? If we monetize most of the debt, what happens to the economy and inflation? It feels like a kamikaze dive bomber mission.
MAD Macro - Kamikaze Economic Policy
MAD Macro - Kamikaze Economic Policy
MAD Macro - Kamikaze Economic Policy
Japan Eases and Tightens, Kamikaze Style What Happened to Truth Social? Economic policy in Japan is very confusing. My favorite “inflation is transitory” macro economist, the Jesus of macro, David Zervos, has new commentary about Japan’s latest monetary policy stance. To quote David, “Engaging in straight-up QE, while raising rates, is something completely different. It’s a highly incongruous policy mix I believe we have never seen before.” Yes it’s strange, but Japan’s central bank, the BOJ, has been buying their own government debt and public equity market for so long we all forgot they were still doing it. They now own 53% of their own bond market and are also the largest shareholder of the Japanese stock market. They have no plans to stop buying as they raise interest rates. David, who has never met a central banker he doesn’t like, thinks it might be a good idea and maybe we should try it. I am not sure what to think? It’s always seemed to me that the BOJ was engaged in a kamikaze economic policy. If they buy all of the government debt, does it matter? If they do, what’s their debt to GDP ratio, zero or 250%? David believes that the U.S. Fed will stop QT when they start easing in June. If the Fed maintains a very large balance sheet, what is the U.S. debt to GDP ratio, 97% or 120%? Do high levels of government debt even matter if central banks buy most or all of it? If we monetize most of the debt, what happens to the economy and inflation? It feels like a kamikaze dive bomber mission.