If it shows up at the Federal Reserve, you can pretty much bet everything you own that it was tried out at the Bank of Japan first. And if it was the brilliant brainchild of someone at the BoJ, then you’re guaranteed it failed spectacularly. Which means, obviously, the “ideal” technocrats at the Fed intentionally copied something they knew had already proved ineffective and useless.
QE is hardly the only example of this.
More than halfway through the year 2016 when nothing was going to plan, Haruhiko Kuroda’s gang decided they needed a little extra push on the economy. Even though Reflation #3 was stirring underneath, and though Japanese authorities always projected confidence about conditions no matter how badly it was doing, officials worried after having gotten nothing out of NIRP earlier in the year something more would be required.
To try and goose inflation expectations some more, the central bankers hit upon the idea of “overshooting.” On September 21, 2016, the BoJ simultaneously announced Yield Curve Control (which we’ve covered) as well as making the following “commitment” beside YCC:
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The Bank will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds the price stability target of 2 percent and stays above the target in a stable manner. [emphasis added]
How corrupt that they still referred to bank reserves, the byproduct of every form of QE, including Japan’s QQE, as the “monetary base.” Technically true insofar as mainstream definitions go; however, since said definitions are half a century outdated this amounts to useless trivia intended to mislead the public.
The purpose, in lieu of any actual contribution to the effective monetary base in practice by the global banking system, is to make the public and businesses in it believe in “money printing.” Not see it for themselves, or hear about it directly from someone in the real economy experiencing it, because there isn’t any. Believe it as a matter of “trust.”
If anyone in Japan thinks the central bank is credibly promising to be irresponsible with its printing press, then it is assumed by Economists and central bankers (same thing) that those Japanese people will act today consistent with expectations for inflation tomorrow. Becoming a self-fulfilling prophecy, inflation – therefore increased growth, the ultimate object – is achieved.
Year after year, decade after decade, the Japanese people politely but resolutely refuse.
So, the central bank merely changes the phrasing of these promises while doing absolutely nothing different monetarily.
And you’ll probably recognize this Japanese wordsmithing from 2016 in that less than two years later the Federal Reserve would go on to adopt the exact same position. Only, in May 2018 the Fed called its not-brand new commitment “symmetrical” rather than “overshooting.”
Reworded yet again earlier this year in August, today Jay Powell’s crew terms it average inflation targeting.
The point, and the method, is exactly the same in all three; promise to be irresponsible when no central bank has any clue in practice just how. What’s left is this ridiculous and absurd puppet show that never works. Yet, it is copied time and again while being uncritically celebrated in all the financial media as a powerful engine of economic efficacy despite never once achieving anything tangible.
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As I keep having to point out, these are not serious people.
With Japan specifically, the commitment made in September 2016 was for continued expansion in the outdated “monetary base” until the CPI less fresh food reached 2%, moved above 2%, and then remained higher than that target “in a stable manner.” As you can probably guess already, Japan’s CPI less fresh food never once reached 2% let alone climbed above that level, forget staying above.
In fact, this specific inflation index rarely got as far as 1% (only three months out of 50 since introduced did the rate get halfway):
Remember, this “overshoot” stuff was committed to more than four years ago; which leads us to the next part of the official statement:
Through this commitment, the Bank aims to enhance the credibility of achieving the price stability target of 2 percent among the public.
Credibility enhancement: we couldn’t make inflation happen for more than a decade so now we commit to hitting a target we’ve never hit and letting inflation go above that target we couldn’t achieve because we can never get this inflation we keep promising no matter how many bank reserves we create in the process.
These are not serious people. But, and here’s the thing, these are very serious times growing more serious by the month, by the week, maybe even by the day.
You’ve undoubtedly already noticed, too, how Japan is once again experiencing outright deflation. The core rate referenced in the ridiculous “overshoot” policy dropped to -0.7% year-over-year during October 2020 according to figures released today. That makes it five out of the last seven months in deflation, and, if we include June’s zero, six out of the last seven non-positive.
More than that, -0.7% is the worst core inflation figure in Japan in 115 months, just about ten years. You have to go all the way back to early 2011 to find a similarly significant rate of core consumer price declines.
And it’s not as if the Bank of Japan has been sitting idle since the March global recession fueled by GFC2 smashed the world economy. On the contrary, oh no no, the Japanese central bank has leaned hard into its QQE (now well into its eight year) at a vastly accelerated rate; the “printing” has been in overdrive ever since February (below).
That’s eight months of spiraling higher and higher “base money” while inflation only sinks lower and lower. It’s not even a good puppet show:
What’s truly concerning is that here in Japan we find yet another indication of global deflationary forces still picking up in the wake of March; not COVID, either, since Japan like Europe and many other parts of the world had been near or even in recession dating back to the middle of last year. It’s an awful long time to be stuck with widespread contraction running concurrent to QE’s and “money printing.”
More and more there’s outright deflation because: the global economy hasn’t rebounded as it had been expected to by many, including central bankers, leaving it exposed to further consequences of this dead “V”; and, this QE business is no serious business at all, therefore no help to forestall or alleviate the negative forces clearly impeding the worldwide machinery of economic exchange.
Maybe the worst part of all is how this is happening in Japan. What I mean by that is that Japan doesn’thave a COVID problem whatsoever and never really did, thereby removing that as an excuse. The country was not once shut down and isn’t experiencing either a first wave or a second wave in the same respect as so many other places.
If Japan’s economy is sinking further, certainly seems to be, this acknowledges the second wave of deflationary dollar disease running rampant throughout the global economy. For all those still somehow thinking the response to it was ever going to be hugely inflationary, the Bank of Japan is about to exceed three-quarters of a quadrillion yen in assets with absolutely no sign of inflation, growth, or anything other than financial media credibility.
QE doesn’t work. It never has. These programs are not money printing because all they lead to is bank reserves while bank reserves are not a useful form of money. They are instead, in a word, accounting. The logic is as simple as it is unassailable.
When Kate Middleton, the Duchess of Cambridge, stepped onto the red carpet at the BAFTA Film Awards in February wearing a Van Cleef & ArpelsAlhambra necklace and matching earrings, the iconic designs were immediately recognizable to serious jewelry lovers and casual fans alike. What they may not have been as familiar with is the origin story of the more-than-50-year-old collection.
During the late 1960s, fine jewelry changed. Even the most haute of haute French houses expanded their inventories to include more daytime jewels to match the increasingly casual look of women’s fashion and to suit the 9-to-5 schedule of many who were joining the workforce. In 1969, Cartier launched its diamond-free gold Love bracelet. One year before that, Jacques Arpels came up with the all-gold Alhambra necklace.
Jacques — the nephew of Estelle Arpels, who founded Van Cleef & Arpels with her husband, Alfred, in 1906 — liked to say, “To be lucky, you must believe in luck.” This mantra is embodied in the four-leaf clover motif, which can be found in sketches in the house’s archives dating to the 1910s. The quatrefoil shape also has architectural resonance, found in Gothic and Renaissance structures and, of course, in such Moorish buildings as the Alhambra palace in Granada, Spain, which gave its name to the Van Cleef & Arpels line.
The first Alhambra jewel was a long gold chain with 20 gold clovers, the surface of each creased and edged in gold beads. In 1971, the house began making the motif in colorful opaque hard stones, including malachite, lapis lazuli, onyx, coral, tiger’s-eye and turquoise. Today, pieces incorporating these stones and a beaded border are referred to as Vintage Alhambra.
From the moment the collection launched, it was a sensation. The easy-to-wear necklaces were exactly what women wanted to elevate their button-down blouses and wrap dresses. The jewels’ appeal spanned decades and generations. In April 1969, the 26-year-old Swedish actress Britt Ekland donned the original Alhambra gold style for the cover of Vogue. French actress Romy Schneider was around 36 when she sported an onyx and gold version in the provocative 1974 French film Le mouton enragé (Love at the Top), depicting relationships during the sexual revolution. Grace Kelly was photographed several times wearing her all gold and onyx and gold Alhambra necklaces during the seventies, including in the 1977 NBC special about her life, “Once upon a Time Is Now . . . The Story of Princess Grace,” filmed when she was 48.
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The Alhambra line has never gone out of production. Van Cleef & Arpels has refreshed the design by playing with the scale of the motifs and incorporating different gems, such as mother-of-pearl, carnelian and blue agate. It has also extended the collection to include earrings, bracelets, rings and a watch, as well as different necklace styles.
As for any icon with a long track record, the popularity of the Alhambra line, as measured in high-profile sightings, has ebbed and flowed. In the aughts, Reese Witherspoon was routinely photographed in her onyx Alhambra necklace. Sharon Stone and Mariah Carey were also seen sporting pieces from collection. Kelly Rutherford wore several variations when she played the Upper East Side socialite Lily van der Woodsen on Gossip Girl.
Van Cleef & Arpels reignited Alhambra enthusiasm in 2018, when it celebrated the line’s 50th anniversary with new designs and festivities. And royalty is once more playing a part. The Duchess of Cornwall, Camilla Parker Bowles, has Alhambra pieces. And it is widely believed that the Alhambra set the Duchess of Cambridge wore to the BAFTAs was given to her by Prince Charles, her father-in-law, for her birthday, which was a couple of weeks earlier.
The so-called “Kate Middleton Effect” has been known to make an item she wears a best seller or turn a little-known brand into a household name. Van Cleef & Arpels hardly needs any help, but the duchess surely sparked even greater interest in Alhambra, gaining new admirers for a legendary brand that already has them in droves.