Submitted by Jeffrey Snider – Alhambra Investment Partners
While Abenomics continues to be classified as “pro-growth” rather than vilified for what it has done, that is as clear in the real economy as it is in the financial realm. Japanese experimentation with ZIRP has destroyed, effectively, any informational content from the JGB curve which contributes to continued resource waste. The Japanese just auctioned a 2-year note at a negative yield, as the nation continues to achieve these dubious milestones of global repute. Their 10-year has collapsed to barely 30 bps in yield.
These kinds of results are the death of “money” (using the term broadly here, certainly not specifically applicable as true money would prevent all of this). Is it any wonder that the one economy that has been totally disabled for a quarter of a century is ground zero for financial experimentation of the highest order? The death of money is the inevitable conclusion of this trend, and no economy will be able to survive it outside of long-term zombification dooming its people to stagnation and decay. Japanification is not a theory any longer.
Less far along on that trend are the Europeans. The economy is not as obviously in distress as it is in Japan, but it is acknowledged and nearly conventional wisdom that it is not far off from that woeful fate. And like Japan, Europe is awash in the death of money, perhaps even comically so given the state of finance there.
For a detached observer, there is nothing quite like the Swiss government bond “curve.” Of course, it ceased being a curve denoting anything fundamental of Swiss or even broader European economics a long time ago, but in the space of just four months it has been tortured and twisted into a thing unrecognizable to logical finance.
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