LISBON, PORTUGAL – In Japan, incumbent prime minister Shinzō Abe has won a new super majority in parliament.

And you know what that means?

More laughs.

Dumbbell Policies

Yes, the whole world is doubling down on dumbbell policies that don’t work.

(At least, they don’t work for creating honest wealth. They work perfectly well for a predatory global elite, whose win-lose deals slow growth and transfer wealth from the people who earn it to themselves.)

In the U.S., the old gods – balanced budgets and small government – are dead.

In the latest news, “The Donald” has been adding to U.S. debt at the rate of $2 billion per day, even faster than Obama… and in his zeal to pass a tax cut, has chased away the conservatives’ last ghost of fiscal restraint.

Yesterday’s presidential tweet said “NO” to their hope of paying for the tax cuts by tightening up on the 401(k) “loophole.”

In Europe, “Super” Mario Draghi, the president of the European Central Bank, continues to do “whatever it takes” to support the Old World’s new fantasy-finance regime… where Europe’s riskiest company bonds yield less than the safest credit on earth, 10-year U.S. Treasuries.

And now, in Japan, Mr. Abe says he will continue the super-duper policies that have produced such a success so far.

Broken Arrow

Abe came to office five years ago promising to get the Japanese economy rolling. He had “three arrows,” he said:

  1. Monetary policy would be super loose.

  2. Fiscal policy would be inclined to super large deficits.

  3. Structural reforms would correct the problems created by previous super government programs.

The plan in Japan, as elsewhere, was the same old formula: create fake money… lend it at super-low rates… drive up inflation… and incite the public to spend and invest.

The whole idea is preposterous. What dopey jackass first came up with the idea that you could improve a market economy by feeding it fake money?

Can you make a horse run faster by giving it fake oats?

Can you get more mileage out of your car by diluting the gas with water?

Can you clean out your garage by pretending to work on a phony Saturday?

The real world has real challenges and real limits. Flesh and blood. Energy. Time.

An economy is a real thing… with real things in it… governed by universal laws. Time, for example; you can’t trick it.

And you can’t create more of it, either. Time passes. Assets wear out. People get older. They die.

Interest rates connect time, money, and the real economy. At 10% interest, you expect to make back the capital you lend within 10 years. But at 1%, it will take 100 years to make the lender whole.

The Bank of Japan’s target lending rate is MINUS 0.1%.

At that rate, you can wait until Hell freezes over; you’ll never get your money back. A less-than-zero interest rate implies that time goes backward… the future never comes… and capitalism goes into reverse.

Yes, Japan is in fantasyland for old people. The government has denied their main enemy: time. And if time can be stopped… we never have to die.

Government Rathole

Did Abe’s three arrows hit their targets?

Of course not.

Not even close. He aimed for inflation of 2%. (Why do all the world’s central planners think you need 2% inflation? Why not 3%, just to be different?)

Instead, Japan’s consumer prices rise at a rate of less than 1% a year… just as they did five years ago.

Mr. Abe aimed for 3% annual GDP growth. But the Japanese economy grows at about 1.5%… just as it did before he took over.

All his arrows really did was turn Japan into the most indebted old-age home in the world, with government debt at 239% of GDP.

As for death, it remains a problem, too. Already, one-quarter of the Japanese population is over 65. And they’re getting older every day. And dying.

In 2014, for example, 1,200,000 Japanese died. But only 1,000,000 were born. The typical woman in Japan now has 1.3 children – not even close to replacement rate (two children or more).

The Japanese are disappearing. Which raises some basic questions:

Who’s going to buy Japanese houses? Who’s going to buy Japanese stocks and bonds? And who’s going to pay the taxes needed to support a country of old people?

And what’s going to stop a panic when people finally realize that their bonds are worthless and their savings went down a government rathole?

And that Japanese feds can’t honor their promises to their old people?

Instead of facing up to reality, Abe and his economists pull out the fake-money punchbowl.

Party on!

Regards,

Signature

Bill

Editor’s Note: Yesterday, Bill wrote to readers about his skepticism of cryptocurrencies. Our colleague Teeka Tiwari, however, is a self-described “bitcoin bull” and is very bullish on the crypto market. Bill and Teeka recently sat down to talk about cryptos and their future. Keep an eye out for that interview in the next few days.

In the meantime, you can learn more about cryptocurrencies by signing up for Teeka’s upcoming crypto webinar. Get all the details on this free event by signing up right here.

MARKET INSIGHT: CATERPILLAR SHARES SHOOT HIGHER

By Chris Lowe, Editor at Large, Bonner & Partners

bill bonner

Further confirmation of the emerging market bull run…

So far, this year the MSCI Emerging Markets Index is up 29% versus a gain of 80 for the MSCI USA Index.

And as today’s chart shows, investors in the world’s biggest producer of earth-moving equipment, Caterpillar, are betting on higher earnings as a result.

Chart

Emerging market economies tend to have underdeveloped infrastructure – roads, bridges, factories, and so on.

When they’re in growth mode, this sends shares in Caterpillar skyward.

Since the start of last year, Caterpillar shares have moved in almost perfect lockstep with emerging market shares… as investors bet on the emerging market boom continuing.

Chris Lowe

FEATURED READS

The Perpetually Working American
According to new data, Americans are putting off retiring and putting in a few extra years at the nine-to-five. Combine this with the fact that Americans are also dying younger, and your retirement may not be all you hoped for.

Americans Are Falling Into a Debt Trap
In the last 12 months, consumer debt levels have risen by half a trillion dollars. Total consumer debt is now higher than it was before the financial crisis. And all that adds up to trouble.

The Leaked Trump Memo Investors Are Reading Now
A leaked White House memo hints that President Trump could soon make a huge change to this sector. When that happens, a handful of stocks could be primed to soar. Palm Beach Letter editor Teeka Tiwari has all the details.

MAILBAG

In the mailbag, Bill’s essay, “The White House Has Lost Control,” has gotten some readers thinking…

Uh oh! You said that “…there is still a whiff of decay about it… like a great oak with a few dead limbs… or a beautiful woman with a few gray hairs.” I suspect that a “Trump-esque” apology will soon be in the works to appease the Bonner Babes.

– Jim B.

You said that “The U.S. is the world’s oldest government, apart from quirky city-states…”

You mean the government formed in 1787 or the one formed in 1871? Also called the Act of 1871 or an act to form a government for the District of Columbia.

More importantly, is that government existing under the territorial authority of the United States of America or is it a city-state as well? And does citizenship in this city-state constitute a second citizenship which has, for all intents and purposes, usurped citizenship of a de jure state?

– Mike R.

Most of your scribblings in the Diary bring up questions, but no action suggestions. Any person can do this! How about some suggestions or some direct answers on solutions to the problems most of us already know?

– Ernest H.

Meanwhile, a reader has a suggestion for Bill during his travels through Portugal

While in Portugal, visit the Fátima Shrine. It may give you an inspiration as how to end this world crisis that we are in.

– Ernest H.

IN CASE YOU MISSED IT…

The cryptocurrency market has taken off in 2017. And as Bill has written, nobody knows precisely where it will go or what will happen.

But if you’ve ever been curious about these little-known assets, then we recommend you attend this free training webinar.

It’s hosted by cryptocurrency expert Teeka Tiwari. Teeka has been studying the crypto world since the beginning. On November 2, Teeka will show readers everything he’s learned about cryptocurrencies and teach you how to trade cryptocurrencies today. Reserve your spot right here.

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