Japan is now in its 33rd year of "Lost Decade"

According to my blog visitor stats writing about Asian Infrastructure Investment Bank did not generate much interest. The traffic has spoken.

With that in mind let’s look at the idea that Fed chair Janet Yellen will raise rates this year.

The best economic history we have of a central bank and/or government buying its debt along with other toxic assets is Japan.

Japan is now in its 33rd year of a “Lost Decade” of near-zero economic growth.

So since none of the QE actions have any better history than that, its safe to say 2015 will not see a rate rise, since growth is not a “buy” product of QE.

The best reading of US Q1 GDP is with the Atlanta Fed Banks estimate of 0.2%. This tells you all you need to know on growth.

Five years after former Fed chief Ben Bernanke spotted green shoots, which of course died on the vine many many times, the US economy cannot generate a 3% GDP growth rate for the year. No other time in modern history have we gone longer than 3 years without posting 3% GDP and that includes the Great Depression.

This week you have Bernanke writing in his new blog how ZIRP did not “throw senior citizen savers under the bus” so to speak.

Bernanke references real interest rates, which takes into account the inflation rate. This is the greatest fear of central bankers. The lack of inflation – which doesn’t hurt savers – is the demon of central bankers since they have no tools to deal with it since the US is already at ZIRP.

As retail spending is set for a 4th monthly decline and savings rate is climbing, all Yellen and crew have is their jawboning that rates will rise soonish. That is not the best tool to grow an economy.

 

 

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