When I started my Econometrics study for my graduate degree dissertation, I wanted to focus on central bank balance sheet expansion and the resulting Bond Market distortions using the Japanese example. Here is the second part, where I delve deeper into the sociological impact of these economic public arbitrage inspired by the heterodox Modern Monetary Theory.

ZIRP policy from the Bank of Japan in the 1990s and QE from the 2000s were the culprits in the societal changes in Japan at the turn of the millennium. The canary in the coal mine eventually led the Fed and the ECB to replicate the model out of deflationary fears, with the same results in the societal impact on the population.

Considering the failure to reach the targeted goals from Japanese Monetary officials in kickstarting inflation and pushing the natural population growth in a bearish demographics environment, the Western official version sounds in hindsight like a disguised attempt to inflate financial assets for the benefit of the very few, and euthanising the fertility rate, not discounting the bailouts to safeguard boomers and screw moral hazard at the expense of the younger generation to protect a financial Ponzi scheme to the benefit of speculators, reinforcing today's neo-feudalism.

This has led to the zombification of the Japanese economy, with companies relying on cheap debt to survive but with little growth prospects, overinflated real estate, low organic growth, and a high debt-to-GDP ratio.

This has been reinforced by domestic specificities keeping JGBs yield low, such as Japan's current account surplus and excess savings rate over domestic investment—high FInancial Nationalism regarding institutional investors' preferences towards domestic assets. Thanks to Japan's long-term deflationary history, when it comes to debt sustainability, market perception helped despite the absolute value of the Japanese debt overhang, enabling the government to borrow at a ridiculous rate.

Despite running recurrent trade deficits thanks to the reserve currency, the US could borrow cheaply until recently, not to mention the Fed's shenanigans. US CPI remained relatively low until the end of COVID-19, considering the recurring Quantitative Easing efforts during the Bernanke and Yellen tenures.

Having set up the economic background of the first 20 years since the beginning of the millennium, Japan has never recovered from their lost decade, no matter what the Japanese public institutions did. This resulted in a shrinking workforce and economic productivity. Rising healthcare and pension costs and women entering the workforce clashing with traditional societal forces.

This created a "precariat" class, including young people who could not secure stable jobs, declining consumer confidence and spending, with increased economic inequality and reduced social mobility.

The parallel is getting more potent when we look at the rise of non-traditional lifestyles such as singlehood and alternative family structures. Fertility rates are declining further, not helped by the inability of the youth to get on the housing ladder thanks to the monetary malarkey and its unintended consequences thanks to public policy officials arbitrage to the benefit of the older population. This created a disincentive towards marriage from the younger generation, who would instead focus on personal freedom: "Let's travel. Who cares about saving a deposit? We got cheap debt, so let's have fun, not like our shit jobs offer us more prospects in the future". And men saying: "Screw being a breadwinner, let's play video games and live like NEETs".

The 2000s Japanese Herbivores are the 2020s Western Incels.

Most of what we currently see in the West was found in post-2000 Japan. Still, G7 is now getting crushed by higher yields. With AI advances ushering deflationary pressures through increased productivity and lower labour costs, the paradigm of the past is about to be crushed,

Eventually, the private sector, despite the best efforts of proto-monetary Stalinists to keep the status quo to the benefit of boomers, will experience a Schumpetarian creative destruction of the BS jobs and the labour force holding them. Previously hindered real value creation through the fakery of national fiat currency pumping up BS GDP numbers via monetised debt and other trickeries...won't be anymore.

The general impact will be unstoppable, and actions such as the BOJ's desperate attempts to dump massive amounts of US treasuries to counter the crushing of the Yen against the dollar will not stop the trend that started.

"Brave New World" Aldous Huxley.

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