QE TAPER: The Japanisation of America

benjan1titleYes we can or not with reservations

Light the blue taper and retire immediately

The tapering of QE in the US is going to be ooooooo so graduaaaarrrlllll. Ben has got Janet on message, and so now she’s not so much Yellen as willin’. It all feels a bit Dickensian: “You just tells her, Mr David, that Barkis is willing”. At school the spoonerism also occurred to me: Willis is barking. Janet Yellen seems to have gone native in record time.

The Bank of Japan (BoJ) announced the introduction of QE on 19 March 2001 and kept it in place until 9 March 2006. The BoJ plumped for a ‘orderly and gradual’ unwinding of its government securities portfolio, by continuing its regular purchases of these securities…..that is, Tokyo tapered aaaaaaaahso gladuaaaarrrrry.

At the time, the Nikkei celebrated its release into the outside world of normalisation. For two weeks. Then in the next eight weeks, it fell by a quarter.

Are there any learnings for us here? Well actually, yes – there might well be. As in, buy some bear notes right now.

Overlay the Japanese Topix bank index of 2006 onto the Russell 2000 US index for 2013…..and what you get is  Rafael Nadal v Roger Federer in the 2008 Wimbledon Tennis final…..aka, a perfect match.

As Mark Twain said, “History doesn’t repeat, but it does rhyme”.

PS Someone very kindly sent me an Ambrose Pritchard-Evans article from the Telegraph, as they appear to have had an epi again – and are blocking me. The column was a sort of ‘fond farewell to QE’ thing. “It has served us well” he wrote.

Is it me, or is AEP going quietly round the bend? Is he the human version of turning the corner, I wonder?

Yesterday at The Slog: Deconstructing the Jobs-growth codswallop