What happens when you want to do more quantitative easing (QE) but there isn't anything left to buy with your newly printed money? That, say some, is soon to be a problem in Japan.
There, the Bank of Japan is buying bonds as fast as the government can issue them, and is already the second largest holder of Japanese equities. That means that it has come to the end of the QE road. If you can't buy, you can't print.
Not so, says Albert Edwards of Socit Gnrale. Think back, if you can, to 2002 and Ben Bernanke's famous "helicopter money" speech. In it, he pointed out that running out of domestic assets to buy should present no problem at all to the dedicated money printer, because central banks can just use their new money to buy foreign assets instead.
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
After all, if the core point of QE is to drive down your currency so that you gain a competitive edge over your competitors (which it is, by the way) then why not just drive it down directly? Why not print your own currency and then sell it to buy foreign government bonds, for example?
Look at the example of Japan next to the recommendations Bernanke made all those years ago, says Edwards, and it is perfectly obvious what the next stage in the global currency war will be: "direct currency intervention." We suspect he is right. We also suspect that it won't be the last innovation in this round of monetary excitement.
Russell Napier has been saying for some time that we should expect to see everything from people's QE (explicitly printing money to finance state spending) to the cancellation of student loans in the US. Belief in the idea that you can't print money just because the assets you usually buy have run out is to seriously underestimate the creativity of global central bankers.
-
Adidas, Nike or Jordans - could collectable trainers make you rich?The right pair of trainers can fetch six figures. Here's how you can start collecting vintage Adidas, Nike or Jordans now
-
Early bird ISA investors flock to global funds, India and the USThere’s been an increase in investors maxing out their ISA at the start of the new tax year. But where are they putting their cash and why does it make sense to be an early bird investor?
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
