Japan, as a large and advanced economy with a big appetite for its own debt, was supposed to be different. It wasn’t — the blowup just took longer.

I wonder if this will be true this time. This article reads like an "I told you so" but the yen has been doing this thing in a slow way for quite a while. And people have predicting doom for Japan for a lot longer than that (decades?).

the idea that countries could run up debt and suppress interest rates depended on the assumption that inflation would never return. This was especially true in Japan, which suffered from extremely low inflation for decades.

But once inflation returned, markets pushed yields up — which meant keeping rates low took more intervention. It also forces central bankers to choose between higher inflation or higher costs to service the debt. They can only choose debt for so long before higher inflation expectations become entrenched, pushing rates up even further, causing a vicious cycle that is impossible for even the best central banker to manage.

The lesson here is that inflation risks never disappear. Inflation has been a risk since the creation of currency. Yes, monetary policy is much better at containing it, but as the world learned after the pandemic, inflation can always come back.

I read this article looking for something new, and I don't think I see it. I'm definitely in the winter is coming camp, but as we seem to be discovering, winter--just like GRRM--can take its sweet time.

archive link