Submitted by John Mauldin – Mauldin Economics
“When it becomes serious, you have to lie.”
“I’m ready to be insulted as being insufficiently democratic, but I want to be serious… I am for secret, dark debates.”
“Of course there will be transfers of sovereignty. But would I be intelligent to draw the attention of public opinion to this fact?”
“If it’s a Yes, we will say ‘on we go,’ and if it’s a No we will say ‘we continue.’”
“We all know what to do, we just don’t know how to get re-elected after we’ve done it.”
– All quotes from Jean-Claude Juncker, prime minister of Luxembourg and president of the European Commission
I’ve been busily writing a letter on oil and energy, but in the middle of the process I decided yesterday that I really needed to talk to you about the Bank of Japan’s “surprise” interest-rate move to -0.1%. And I don’t so much want to comment on the factual of the policy move as on what it means for the rest of the world, and especially the US.
But before we go there, I also want to note that today is Iowa, and so we’re about to turn a big corner in what is fast becoming one of the wackiest years in American political history. I’m going to sit down tonight after the caucus results come in and write to you again, for a special edition of Thoughts from the Frontline that will hit your inbox tomorrow. Along with Iowa, I want to delve into the issue of what a “brokered convention” would mean for the Republican Party, and what one would look like.
I have been steadfastly maintaining that the Bank of Japan was going to augment its quantitative easing stance sometime this spring. Inflation has not come close to their target, and the country’s growth is dismal, to say the least. So the fact that the Bank of Japan “did something” was not a surprise. I will however admit to being surprised – along with the rest of the world – that they chose to do it with negative interest rates. Especially given the fact that Kuroda-san had specifically said in testimony to parliament only a few days earlier that he was not considering negative interest rates.
While this development is significant for Japan, of course, I think it has broader implications for the world; and the more I think about it, the more nervous I get. First let’s look at some facts.
Conspiracy theorists will love this Bank of Japan timeline:
Jan 21 – Kuroda emphatically tells Japanese parliament he is not considering NIRP. Continue reading