The definition of the term Hail Mary as it pertains to football, provided here by Wikipedia, does a sterling job of setting the stage for this week’s topic:
A Hail Mary pass or Hail Mary route is a very long forward pass in American football, made in desperation with only a small chance of success, especially at or near the end of a half.
Yes, the Hail Mary is used in desperation, near the end of a contest when there is only a small chance of success…
When Abenomics was unveiled in Japan upon the re-election of Shinzo Abe as prime minister in late 2012, it is safe to say that, having been mired in a 20-year deflationary spiral and with debt totaling 240% of GDP, Japan was nearing an endgame of sorts.
For two decades the country had watched the yen strengthen and endemic deflation thwart any and all attempts to generate even moderate inflation, as repeated bouts of quantitative easing failed to administer the desired antidote to Japan’s ever-increasing debtload.
Realizing just how late in the game he found himself, Abe promised to change all this, but in order to do so he needed to pursue a high-risk strategy with a low probability of success.
The press (ever hungry for a new, catchy portmanteau word) dubbed it “Abenomics.”
Grant Williams, in his excellent letter below, prefers to call it “Avenomics”: the economics of the hopeless.
Abe’s opening (and perhaps his most important) gambit was the politicization of the Bank of Japan. Without a complicit governor quarterbacking Japan’s printing press, any attempt at reaching the endzone would be futile.
[The story twists and turns]
So here he is — Japan’s great hope — with time about to expire and the pressure mounting.
Facing the rush of a moribund economy, entrenched price deflation, an aging demographic that has drawn down its savings and actually likes the idea of lower prices, and a debt mountain that eclipses that of every other major economy on earth, is it any wonder that Abe-san has decided to hurl the ball into the endzone and hope that a helpful pair of hands hauls it in for a TD?
Of course, popular thinking goes that, since Japan has been doing the constant-stimulus thing for two decades without any noticeable consequences, all will be well; but the problem lies in the fact that, throughout the nineties and noughties, Japan was basically scrimmaging on its own practice field — alone, behind closed doors.
Now they find themselves in a competitive game with every other major economy in the world suited up and also needing higher inflation, weaker currencies, and genuine growth after littering the field with trillions in stimulus.
Say a prayer for Shinzo Abe, folks. For Avenomics to score, he’s gonna need a miracle.
Full Grant Williams Letter below: