I think your thesis is quite interesting and agree we are in the throes of some fundamental changes. two issues I see though are; 1) governments will not easily relinquish the power of controlling money and given how large they have grown, that battle will take a very long time to come to a conclusion, decades at least, and 2) they call betting on BOJ tightening the widow maker for a very good reason, in my 40 years in the markets, it has been a major theme at least 4 or 5 different times and has yet to occur. as long as inflation remains a political question, and not a financial one, and until the politics in Japan are such that inflation is a problem, while I could see a token effort to go from NIRP to ZIRP, looking for any more than that would be a mistake in my view.
This appears to be the perceived wisdom pervading markets currently. Until the US government reduces its debt or Japan changes its zero rate policies the game will continue. I guess the latter is more likely but why will they do it when the risks are so clear. Suspect a left field event more likely as see no chance of the US or indeed U.K. attempting to balance budgets under as you have correctly highlighted the new socialist system.
The liquidity injections from exploding fiscal deficits are more analogous to the effects of central planning and the Cantillon Effect (i.e., funneling capital to bureaucrat-selected sectors in the form of the Inflation Reduction Act, CHIPS Act, CARES Act, etc.).
Incidentally, the gold market (GDX, XAU) has been an absolute dumpster fire the past few years—I can't even imagine what would happen to those companies if liquidity dried up
Thanks for this article, very interesting as usual. Your view of a change, from this tendency of corporatocracy to something else, seems to me very correct. In this view, a land war like what we see in Ukraine, would, probably, make everybody re-consider the ideas of states, and governments, towards corporations. Also, the differences we see in China, where, as you have written many times, corporations have not been allowed to grow more than needed to the state, might be of interest. Japan might be a kind of third way of thinking, and this might explain their policies, to some extent. Hope it makes some sense. Thank you.
War is very bad for corporatocracies - and one political point of globalisation was that nations that trade with each other don't go to war with each other. If China did invade Taiwan, and the US did intervene, it would be very negative for US stocks... which is why I think you see strong isolationist wing in the republican party....
I think your thesis is quite interesting and agree we are in the throes of some fundamental changes. two issues I see though are; 1) governments will not easily relinquish the power of controlling money and given how large they have grown, that battle will take a very long time to come to a conclusion, decades at least, and 2) they call betting on BOJ tightening the widow maker for a very good reason, in my 40 years in the markets, it has been a major theme at least 4 or 5 different times and has yet to occur. as long as inflation remains a political question, and not a financial one, and until the politics in Japan are such that inflation is a problem, while I could see a token effort to go from NIRP to ZIRP, looking for any more than that would be a mistake in my view.
They have food inflation now... and China seems able to resisit devaluing... so maybe a new world?!?
it is a new world, that's for sure
This appears to be the perceived wisdom pervading markets currently. Until the US government reduces its debt or Japan changes its zero rate policies the game will continue. I guess the latter is more likely but why will they do it when the risks are so clear. Suspect a left field event more likely as see no chance of the US or indeed U.K. attempting to balance budgets under as you have correctly highlighted the new socialist system.
I suspect UK will do well under labour
Yes, I agree that there is no generalized bear market until the BoJ gets hawkish.
One reason why carry-type trades have done so well amidst so much geopolitical uncertainty is the loose monetary policy from BoJ.
Then again, with China have emerged as such a profound economic competitor, can the BoJ afford to tighten policy?
You might need to wait until China is shut out of global auto markets before the BoJ is confident enough to tighten policy.
That they have not tightened already makes it more of a mystery when they will
The liquidity injections from exploding fiscal deficits are more analogous to the effects of central planning and the Cantillon Effect (i.e., funneling capital to bureaucrat-selected sectors in the form of the Inflation Reduction Act, CHIPS Act, CARES Act, etc.).
Incidentally, the gold market (GDX, XAU) has been an absolute dumpster fire the past few years—I can't even imagine what would happen to those companies if liquidity dried up
Thanks for this article, very interesting as usual. Your view of a change, from this tendency of corporatocracy to something else, seems to me very correct. In this view, a land war like what we see in Ukraine, would, probably, make everybody re-consider the ideas of states, and governments, towards corporations. Also, the differences we see in China, where, as you have written many times, corporations have not been allowed to grow more than needed to the state, might be of interest. Japan might be a kind of third way of thinking, and this might explain their policies, to some extent. Hope it makes some sense. Thank you.
War is very bad for corporatocracies - and one political point of globalisation was that nations that trade with each other don't go to war with each other. If China did invade Taiwan, and the US did intervene, it would be very negative for US stocks... which is why I think you see strong isolationist wing in the republican party....