The early thinking is that Abe didn't do enough
The post-mortums of Shinzo Abe's political career are being written now and they contain some telltale signs of what's coming next.
The early thinking is that Abe was on the right track; the three arrows of "bold monetary policy, flexible fiscal policy and a growth strategy" were the right ones, he just didn't go far enough.
The FT today outlines six lessons:
- Monetary policy works
- Weak economies cannot handle tax hikes
- Credibility is everything
- You cannot rely on expectations alone
- Stimulus does not cause problems with public debt, it solves them
- Growth strategy is limited by political reality
I think this is critically important because leaders increasingly recognize themselves as facing a Japanification scenario of low growth and low inflation.
The growing Davos-consensus is seen in these lessons and the match up with what voters are voting for: runaway spending with little heed paid to deficits.
The more time that goes by, the more I'm convinced that the decade ahead will be all about massive, non-stop fiscal stimulus. That's bullish for risk assets, commodities, emerging markets and precious metals.
