{"id":39052,"date":"2013-06-18T07:16:43","date_gmt":"2013-06-18T11:16:43","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=39052"},"modified":"2013-06-22T07:17:52","modified_gmt":"2013-06-22T11:17:52","slug":"abenomics-the-biggest-ponzi-scheme-in-history","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/06\/18\/abenomics-the-biggest-ponzi-scheme-in-history\/","title":{"rendered":"Abenomics: The Biggest Ponzi Scheme in History?"},"content":{"rendered":"

By George Leong<\/a><\/p>\n

All of you know how I feel about the Japanese stock market<\/a> and the economy in general.<\/p>\n

Yes, I was wrong in the past when I suggested traders and investors stay away from the Japanese stock market. The benchmark Nikkei 225 has been the top performer this year; in fact, at one point on May 23, the stock index was up a hefty\u2014though undeserved\u201470% or so.<\/p>\n

Yet despite all of the hoopla regarding how Japanese Prime Minister Shinzo Abe has become a rock star in Japan\u2019s equivalent of Wall Street due to the country\u2019s massive stimulus regime referred to as \u201cAbenomics,\u201d I still remain unconvinced about the Japanese stock market.<\/p>\n

Just like the Federal Reserve here with Ben Bernanke, Abenomics is all about driving the economy by flooding the monetary system with easy and, essentially, free money. (Can you say \u201cPonzi scheme\u201d?) And when money is free, it is expected that consumers and corporations will spend it. But the problem, just like the one we\u2019re experiencing here in
\nAmerica, is that the flow of money down the pipeline will create an artificial Japanese economy that will stay stuck in a recession\u2014despite the growth.<\/p>\n

As I mentioned previously in these pages, the flowing of easy money is dangerous because spenders become addicted to the near-zero interest rates.<\/p>\n

Just recall the use of the term \u201cmonetary cocaine\u201d by Richard Fisher, president of the Dallas Federal Reserve Bank, in reference to the Fed\u2019s stimulus. (Source: \u201cFed\u2019s Fisher: We Cannot Live in Fear of \u2018Monetary Cocaine,\u2019\u201d Reuters, June 5, 2013.)<\/p>\n

The failure of the Bank of Japan to offer up new stimulus at last week\u2019s monetary meeting and the subsequent selling in the Nikkei stock market were red flags that we need to watch.<\/p>\n

It\u2019s no different from here; just like the U.S., Japan is currently being driven by the easy money\u2014and traders want more of it. Hold back the easy money, and you\u2019ll see the stock market fall.<\/p>\n

In the Global Economic Prospects report produced by the World Bank, Japan\u2019s gross domestic product (GDP) growth projection was raised to 1.4% from the previous 0.8%. According to the World Bank, \u201cIn Japan, a dynamic relaxation of macroeconomic policy has sparked an uptick in activity, at least over the short-term.\u201d (Source: \u201cJapan growth estimate
\ngets World Bank boost,\u201d The Japan Times News,<\/i> June 13, 2013.)<\/p>\n

The upward revision is encouraging for Japan, but it doesn\u2019t justify the associated rise in the Japanese stock market. Not even close.<\/p>\n

Moreover, last year\u2019s launch of Abenomics will add to the already woeful debt levels in Japan, and, just like the massive debt buildup in America, this will not be good.<\/p>\n

The Nikkei 225 has retrenched 22% from its high on May 23, and I don\u2019t think a bottom has even been reached yet. I said it before and I will repeat it now: I would stay out of the Japanese stock market.<\/p>\n

And just like the United States, Japan will find out very soon that its stock market will be dependent on the flow of easy money to continue its uptick. This is a risky proposition, especially as the global interest rates begin to ratchet higher. And just like America, the Bank of Japan is running a massive Ponzi scheme that could\u2014very simply\u2014collapse.<\/p>\n

This article Abenomics: The Biggest Ponzi Scheme in History?<\/a> was originally published at Investment Contrarians<\/p>\n

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

By George Leong All of you know how I feel about the Japanese stock market and the economy in general. Yes, I was wrong in the past when I suggested traders and investors stay away from the Japanese stock market. The benchmark Nikkei 225 has been the top performer this year; in fact, at one … <\/p>\n

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