What will bring growth and, potentially, inflation?

Watch for banking rules that determine that banks MUST lend above a certain – above current! – level.

In late 80s Japan the BOJ/MoF team had financial institutions shove credit out in the street, irrespective of its utility or even demand.

In “Princes of Yen” they show anecdotes of how it worked:
(Not verbatim)
“Couples who just got married would go to a bank to request X in credit to buy their 1st home and the bankers would offer 2*X”

I don’t want to sound like Mark Faber or Roubini. I am only pointing out the type of measures I am watching on the macro backdrop to really think that deflation isn’t a highly probable scenario.

The final outcome was:
– Initially a crazy asset price bubble, much higher in broad valuation metrics than what we see currently in US market for example for equities and real estate was just insane.
– Inflation isn’t a problem up to this day, thus bond yields have been around 0% for decades.
– Then a bust the japanese haven’t recovered yet in terms of returns in equity prices, property prices and in aggregate indebtedness (public+private).

A real bust likely didn’t happen in Japan because their export machine worked very well for many decades, worked past the bubble peak too, and social cohesion of the population helped w/o social unrest.

On fiscal programs out there today: they’re much more a function of lack of incomes and world disruption caused by fears of COVID19 than an attempt to accelerate growth higher than 2017-2019 real growth levels. A patch, not stimulus programs.

Links:
Princes of Yen: https://www.youtube.com/watch?v=p5Ac7ap_MAY

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