The hammer when it fell was simply an ideological change by the policymakers. Revolted by “les noveaux riches” and with a titanic battle of egos raging between MoF and the BoJ, policymakers chose to reverse their loan program
And, lacking a bid, risk assets crashed. It wasn’t about super sky high equity valuations. It was simply a change in bureaucratic ideology…damn dogmas
Anyway, put me in charge of the ECB and I’ll deliver 3pc GDP growth across the continent by 2023ish; it will be easy. I'll raise official policy rates, abolish Basel III and by re-introducing window guidance, I can command that European banks expand their balance sheets by 10pc
Failure will be punishable by loss of quota. You wanna misbehave?
Not convinced? I hear you: the macro community are going to see a bozzo like me coming from miles away. Rapid private sector bank lending, riskier and riskier lending, debt fuelled asset purchases, bubbles – the €uro will plummet, and my German paymasters will kick me out.
Or will they? Is it inevitable that the €uro crashes under this scenario? I don’t think so because the U.S. Treasury has my back. Bitch!
Remember they promised to stop at nothing to prevent a sharp deflationary rise in the external value of the $. And so, like my brethren at the BoJ, so many years ago, I think I‘ve got job security. Just don’t re-introduce moral-hazard cause I’m the guy who’s gonna take you higher
