Bad news for Domino's Pizza in Japan. The firm decided to celebrate Christmas in Hokkaido where very heavy snow is forecast this year by having its pizzas delivered by reindeer. It hasn't quite worked out as planned. The animals keep wandering off the roads into fields (they prefer to walk on grass and snow) and, according to the Japan Times, they simply cannot be trained to "stop in front of a customer's house". What seemed like a good idea (use an animal that is supposed to be good in snow to deliver in snowy times) just isn't working out quite as planned: Domino's is replacing the real reindeer with "reindeer-themed scooters."
The world's central bankers will sympathise: they too have had a problem (no inflation). They too have found a tool that looks like the perfect solution (super-loose monetary policy). And finally they too have found that it just doesn't work as they thought it would: the world hasn't seen much real deflation since 2008 but endless rounds of QE haven't given us much in the way of growth or inflation either.
So much so that this week the Japanese government have effectively admitted failure in their attempts to create inflation: from 2021, state pension payments will fall if wages and prices fall (rather than just rise if they rise). At the same time central banks everywhere (and in the US and the UK in particular) have started to agitate for fiscal authorities to take over the reflation effort.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This will be one of the themes of 2017: fiscal policy becoming the reindeer-themed scooter of global economic management and the return of inflation that could bring. Will it work? Investors seem to think so (markets have soared since Trump was elected). In the US at least they might be right.
Trump is planning to aggressively cut taxes; to push through new state spending, particularly in infrastructure; and to deregulate various industries. We will probably never know if it will add up to his promised $1trn or not (there'll be overlap and much of it will unmeasurable). But coming into an economy already operating near capacity in terms of employment at least, it will certainly make a difference.
Does that mean you should buy US stocks? Before you do, it is worth remembering two things. First the US market is already expensive, and second corporate profits tend to go down as wages and interest rates go up (both things that will happen if Trump's fiscal stimulus works).
Instead, if you are thinking about where to put money next year, you might look to China (see Rupert Foster's take on this in our cover story), Japan which the rest of the investing world is now joining us in loving (the Topix benchmark is up by 20% since its mid-year low), or, a little down the size scale, some of the UK's more interesting venture capital trusts.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
-
Why we need to get a grip on our governmentEditor's letter Our government is trying to do too much, enacting policies that are destructive to the private sector. It needs to drop the the feel-good nonsense and create policies that lead to long-term wealth, says Merryn Somerset Webb.
