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Reasons to Get Excited About Japanese Stocks

Ambrose Evans-Pritchard Apologises for Being Wrong on QE and Stimulus Spending

Economics / Quantitative Easing Sep 28, 2010 - 05:40 AM GMT

By: Nadeem_Walayat


Best Financial Markets Analysis ArticleAmbrose Evans-Pritchard the head economic poncho at the Telegraph now nearly 2 years from starting his mantra of deficit spending stimulus to prevent a debt deleveraging deflationary depression turns around and says that he has been wrong all along, that central banks such as the US Fed are focused on creating inflation rather than preventing deflation.

It took Ambrose Evans-Pritchard 2 years to realise this ?

Way back in November 2008 in an in depth analysis (28 Nov 2008 - Bankrupt Britain Trending Towards Hyper-Inflation?), I specifically highlighted the flaws in the economic theory of the likes of Anatole Kaletsky and Ambrose Evans-Pritchard -

Those that advocate and support the borrowing binge in the mainstream press such as Anatole Kaletsky and Ambrose Evans-Pritchard need to take a look at the real value of their savings, properties and stocks, for they can subtract a further 20 to 30% loss of value over the last 12 months!, and there is more to come, much more, especially if the government takes the whole of banking sectors liabilities onto its books as Iceland was forced to do!

Starting with the sensible economics, the Chancellor is right to cut taxes and to spend and borrow through the recession, undeterred by rising deficit projections and the build-up of public debt. The main reason comes down to a simple proposition that almost nobody in politics seems to understand: for every saver there has to be a borrower.

Hysterical claims that Britain is on the brink of “national bankruptcy”, or that the Government has “run out of money” or that the pound is going the way of the Icelandic krona may be a normal part of political banter, but they are absurd. Britain's public debt-to-GDP ratio, at around 40 per cent, is the lowest among the G7 advanced economies and if it were to rise to 57 per cent, as suggested by Treasury projections, this would not present a serious problem. Nor would it drive up interest rates and inflation, to judge by the experience of Japan, Italy, France and Germany, all of which have public debt ratios above 57 per cent. - Anatole Kaletsky - 27th Nov 08 (Times Online)

With deep embarrassment, I plead guilty to supporting the Brown-Darling fiscal give-away - though with a clothes peg clamped on my nose. As the Confederation of British Industry and many others have warned, we face an epidemic of bankruptcies unless we tear up the rule book and take immediate counter-action. - Ambrose Evans-Pritchard - 26th Nov 08 (

Now Ambrose Apologies - 27th Sept 2010 - Telegraph.

I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.

My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America.

We now learn from last week’s minutes that the Fed is willing “to provide additional accommodation if needed to … return inflation, over time, to levels consistent with its mandate.”

NO, NO, NO, this cannot possibly be true.

Ben Bernanke has not only refused to abandon his idee fixe of an “inflation target”,  a key cause of the global central banking catastrophe of the last twenty years (because it can and did allow asset booms to run amok, and let credit levels reach dangerous extremes).

Worse still, he seems determined to print trillions of emergency stimulus without commensurate emergency justification to test his Princeton theories, which by the way are as old as the hills.  Keynes ridiculed the “tyranny of the general price level” in the early 1930s, and quite rightly so. Bernanke is reviving a doctrine that was already shown to be bunk eighty years ago.

Actually, Ambrose and much of the rest of the mainstream press still does not get it, which is why the inflation trend has stealthily crept upon them as they fell for the Bank of England's worthless mantra of temporary high inflation for the whole of 2010. The Telegraph and the rest of the mainstream press is populated by journalists that think they are economists, though off course academic economists themselves are also usually clueless as they live in ivory towers that focus on the theory of what should happen rather than what is actually happening which can only occur when one is conditioned through the mechanism of actually having to put ones own money at risk, which is why the Telegraph got it wrong when forecasting that UK house prices would fall by another 55% in March 2009, just as they were bottoming and have subsequently risen by 10% over the next 12 months.

Inflation Forecast 2010

UK CPI Inflation at 3.1% for August 2010 is EXACTLY in line with my trend forecast for 2010 as of December 2009 that projected CPI above 3% inflation for most of 2010 and specifically CPI inflation of 3.1% for August 2010. My analysis since November has been warning of a spike in UK inflation as part of an anticipated inflation mega-trend (18 Nov 2009 - Deflationists Are WRONG, Prepare for the INFLATION Mega-Trend ) that culminated in the forecast of 27th December 2009 (UK CPI Inflation Forecast 2010, Imminent and Sustained Spike Above 3%) and the Inflation Mega-trend Ebook of January 2010 (FREE DOWNLOAD) as illustrated by the below graph.

UK Inflation August 2010

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Comments and Source:

By Nadeem Walayat

Copyright © 2005-10 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

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N Patrick
28 Sep 10, 18:18

Hi Nadeem

I am a huge fan of your analysis and writing style. You explain (what otherwise would be difficult) economic theories in understandable terms. Since I enjoy it so much I am a little annoyed with myself that I cannot do your analysis on my own - I did not study economics at university, I studied law, and I feel I do not have the skill set to engage in the data analysis. I was thinking of doing an MBA but I am unsure if it will give me the skills to do what you are doing - do you have any thoughts? Though it is probably too late for me to change my career, would you mind sharing what degree you did so that I can encourage my own kids (one day) too do what you're doing? I think if I can start them on the right path to learn about the world and to think independently, they'll do themselves justice.

Many thanks

A loyal reader!


29 Sep 10, 03:40
Analysis / Trading


your not going to learn how to trade and accurate analysis from academia.

In my opinion the only way to learn is to be conditioned by the market through the mechanism of making money when you are right and losing money when you are wrong.

After many years this will likely lead you to the conclusion to be skeptical of all analysis and methodologies so that you don't forget the primary goal of analysis which is to arrive at an actionable high probability conclusion.

Also trading and analysis are two seperate excercises.



30 Sep 10, 10:21

I am not saying you are incorrect in your assumption of what the Fed are trying to orchestrate but I wonder how you explain away Japan. To all intents and purposes they did exactly what the US are busy doing but on an even grander scale and twenty years later they still have deflation ?

30 Sep 10, 14:55


My focus is the UK economy and then the US economy, after which I barely have enough time to peer over the english channell, let alone over to Japan.

Japan is Japan for Japanese to figure out why, what, where, when.



Shelby Moore
30 Sep 10, 23:03
Japan vs. now

I will be submitting an article to explain this difference between Japan's deflation and the current global deflation, which ends up being inflationary as priced in every currency except for gold and silver.

Suffice it to say that the current deflation of financed "assets" is forcing companies to lower labor costs, and 7 to 10 developing world workers for every outsourced western worker, means more basic commodities consumed (but not 7 to 10 times more, because developing world people save more).

Also Japan internally financed much from their very high personal savings rates, which is opposite of the current situation.

Keep an eye out for my new article tomorrow. It is going to explain everything about inflation versus deflation succinctly.

01 Oct 10, 04:36
Japan Deflation / Inflation
I did cover some aspects of Japan about 6 weeks ago in the article -

26 Aug 2010 - Deflation Delusion Continues as Economies Trend Towards High Inflation

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