U.S. Fed’s Dangerous Game
Yesterday, we warned that the Fed was playing a dangerous game with inflation.
Today, we want to take note that the Fed is in fact just one of the Central Banks doing this.
Indeed, in Japan inflation has already begun to take off, driven by the Bank of Japan’s $1.4 trillion QE program.
Bloomberg notes that inflation has weakened the yen by 6.8% in the past 12 months… and the cost of living in Japan is now at a five year high.
We’ve highlighted the critical parts in the below article for your review.
The misery index, which adds the jobless rate to the level of inflation, will climb to 7 percentage points in the three months starting April 1 when Japan raises its sales levy to 8 percent from 5 percent, based on the median estimates of economists in Bloomberg News surveys of unemployment and consumer prices. That would be the highest level for the measure since June 1981 when Japan was emerging out of depression after the oil shocks in the 1970s.
Bank of Japan monetary stimulus designed to spur economic growth and achieve 2 percent inflation has weakened the yen by 6.8 percent in the past 12 months, eroding the value of wages to a record low. Abe, the son of an ex-foreign minister who grew up in a house with servants, is under fire from the opposition party after the cost of living surged to a five-year high.
Japan’s Prime Minister ran on a platform of creating inflation to drive growth. He’s now finding out that inflation and growth do not go hand in hand (inflation actually eats into growth by debasing the currency).
This is a real problem for Japan… and the rest of the world. Global Central Banks have printed over $10 trillion in the last five years. This money is seeping into the financial system, pushing up the cost of living everywhere.
In Japan, it’s pushed the misery index to a 33 year high. Who knows what it will do for the rest of us.
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Phoenix Capital Research
Graham Summers is Chief Market Strategist for Phoenix Capital Research, an independent investment research firm based in the Washington DC-metro area with clients in 56 countries around the world.
Graham’s clients include over 20,000 retail investors as well as strategists at some of the largest financial institutions in the world (Morgan Stanley, Merrill Lynch, Royal Bank of Scotland, UBS, and Raymond James to name a few). His views on business and investing has been featured in RollingStone magazine, The New York Post, CNN Money, Crain’s New York Business, the National Review, Thomson Reuters, the Glenn Beck Show and more.