{"id":37388,"date":"2013-04-08T18:12:04","date_gmt":"2013-04-08T22:12:04","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37388"},"modified":"2013-04-08T18:35:55","modified_gmt":"2013-04-08T22:35:55","slug":"time-to-elave-the-casino-and-buy-gold","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/08\/time-to-elave-the-casino-and-buy-gold\/","title":{"rendered":"Time to leave the Casino (and Buy Gold)"},"content":{"rendered":"

By Bill Bonner<\/strong><\/p>\n

On Friday, the Bank of Japan hit the markets with a zany
\nannouncement. It said it was going to double the country’s monetary
\nbase! From Reuters<\/strong><\/a>:<\/p>\n

The Bank of Japan unleashed the world’s most intense burst of
\nmonetary stimulus on Thursday, promising to inject about $1.4 trillion
\ninto the economy in less than two years, a radical gamble that sent the
\nyen reeling and bond yields to record lows.<\/em><\/p>\n

New Governor Haruhiko Kuroda committed the BoJ to open-ended
\nasset buying and said the monetary base would nearly double to 270
\ntrillion yen ($2.9 trillion) by the end of 2014, a dose of shock therapy
\nofficials hope will end two decades of stagnation.<\/em><\/p>\n

The policy was viewed as a radical gamble to boost growth and
\nlift inflation expectations and is unmatched in scope even by the US
\nFederal Reserve’s own quantitative easing program.<\/em><\/p>\n

Will it work? Will it put some life into the Japanese economy?<\/p>\n

Nomura Research Institute chief economist and expert on Japan’s “balance sheet recession” Richard Koo says no.<\/p>\n

Koo says this kind of monetary stimulus won’t do the trick. Because
\nbusinesses and households are still rebuilding their balance sheets and
\npaying down debt. The Japanese feds may make more money and credit
\navailable, but the real economy won’t take it. Instead, the money will
\njust pour into the (speculative) stock market.<\/p>\n

The yen fell on the announcement. And Japanese stocks shot up. But
\nthe US stock market was unimpressed. The Dow fell 40 points on Friday.<\/p>\n

Desperation and Lunacy<\/h3>\n

What to make of it? The world’s third largest economy. A jolt of
\nmoney printing unprecedented in world history. And the Fed, BoE and ECB
\nall following along.<\/p>\n

The BoJ says it just wants to get inflation to 2%. It says it will
\nbuy bonds with fiat money that didn’t exist previously… and keep
\nbuying… until inflation reaches 2%.<\/p>\n

Then what? Well, we guess it will stop.<\/p>\n

And then what?<\/p>\n

Then it will have an economy that has come to expect 70 billion yen
\nin new money every month. And an economy with a monetary base (the
\n“stock” from which the “soup” of money supply is made) maybe twice what
\nit is today.<\/p>\n

We don’t know what that will mean for Japan. Will the asset prices collapse again when the money printing stops?<\/p>\n

Will the economy pick up… the banks begin to lend again… and consumers go on a spending binge?<\/p>\n

Or will investors all over the world dump their yen, eager to get out of the Japanese paper money before inflation levels get out of control<\/strong><\/a>?<\/p>\n

We don’t know. But neither do the Japanese feds. As Reuters describes it above, it is a “radical gamble.”<\/p>\n

People make radical gambles now and then. Businessmen might take a
\nchance now and then. Gamblers might go for long odds. Lovers might hope
\nto get lucky.<\/p>\n

Traditionally, central banks do not make “radical gambles.” They tend
\nto eschew gambles of any kind, even of the most respectable and
\nbourgeois sort.<\/p>\n

Central banks are meant to be stolid and boring. Spiders should be
\nable to weave their webs in front of their vaults and remain unmolested.
\nCentral bankers are not supposed to call press conferences. (They not
\nsupposed to have anything to say in the first place.) And all requests \u2013
\nwhether for bailouts, interviews or lunch \u2013 should be answered with an
\nunyielding “no.”<\/p>\n

For a central bank to make a “radical gamble” bespeaks desperation and lunacy.<\/p>\n

How this gamble will pay off, we don’t know. We simply note most of
\nthe world’s major central bankers are putting their money on the same
\ncolor… and as the wheel spins… we urge dear readers to leave the
\ncasino.<\/p>\n

Neither in yen, euros, pounds nor in dollars should we be. For when
\nthe dust finally settles on this wild riot of radical gambles by central
\nbankers, gold will be the “last man standing.”<\/strong><\/a><\/p>\n

Regards,<\/p>\n

Bill<\/p>\n

To learn more about Bill visit his Google+ page or Bill Bonner’s Diary.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Bill Bonner On Friday, the Bank of Japan hit the markets with a zany announcement. It said it was going to double the country’s monetary base! From Reuters: The Bank of Japan unleashed the world’s most intense burst of monetary stimulus on Thursday, promising to inject about $1.4 trillion into the economy in less … <\/p>\n

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