In spite of the complete failure of Keynesian and Monetarist policies of Japan over two decades, amazingly Paul McCulley wants Japan to go “All In”.

Disgusted minds are reading Pimco Says BOJ May Consider Selling Yen, Buying Debt.

“Japan’s problem is deflation, not inflation as far as an eye can see,” wrote Paul McCulley, a member of the investment committee, and Tomoya Masanao, the head of portfolio management for Japan, in a report on the Web site of Newport Beach, California-based Pimco. “An ‘all-in’ reflationary policy is what is needed.”

The BOJ may also consider promising to refrain from raising interest rates until inflation becomes “meaningfully positive,” McCulley and Masanao said.

Japan has the highest debt-to-GDP level of any industrialized country to the tune of 227% of GDP. It has built bridges to nowhere, held interest rates at .1% for a decade, tried massive amounts of quantitative easing, Keynesian stimulus, and even at times sold Yen to buy dollars.

The result is two decades of total failure. Japan’s recession is 19 years running. The Nikkei hit 38,900 in 1990 and sits at 10,800 today, down 72% two decades later.

$Nikkei Monthly

click on chart for sharper image

Paul McCulley Wants Japan To Go “All In”

This brings to mind a frequently cited definition of insanity.

Definitions of Insanity

  • In One Sentence: Insanity is doing the same thing over and over and over and expecting different results each time.
  • In Two Words: Paul McCulley
  • In One Word: Keynesianism
  • In Another Word: Monetarism

Japan has already gone “all in”. It has tried everything under the sun for two decades including Keynesianism, Monetarism, and selling its own currency to sink it. All it has to show for its efforts is a massive pile of debt equaling 227% of GDP.

Amazingly, some people have learned nothing from two decades of complete failure.

Mike “Mish” Shedlock
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