Monday, February 03, 2014
What Have I learned from Abenomics ?
Well I have learned nothing, but the foolish people who take my predictions seriously have learned not to trust my predictions. Noah Smith may have been one of those people. He asked what have we learned from Abenomics. My comment I was a naysayer. I didn't expect bad effects from Abe/Kuroda/nomics but I expected much smaller good effects. Then my fall back was to argue that QE works for Japan because the People's bank of China isn't pegging the value of the Yen. You will notice that this doesn't work. The Abe miniboom is not export led. Japan shows a shift in expected inflation (measured by indexed bond vs nominal bon breakevens) and an increase in building starts. That is the pure expectations Krugman/Woodford/Yglesias/Avent pathway. It can work. I thought the promise to create inflation in the future (when it would no longer be needed) would never be believed by investors and, especially, builders. I was wrong.