My market hermeneutics is this: Japan is trying to weaken its currency by confiscating resources from its financial institutions only, using negative interest charges on bank deposits held at the Bank of Japan. The market says “we don’t believe this can work. If you really want to weaken your currency, you have to confiscate resources from your citizens, perhaps from your median voter too.” Abe won’t do that, not yet at least. And so the Yen is rising. The currency looks stronger than before, yet the overall Japanese situation looks weaker, so Japanese equities are falling sharply.
I wonder which politician will be the one to use monetary policy — not for “people’s QE” — but to confiscate resources from the median voter. It won’t happen tomorrow, or even next year, but yes it will happen in some of the developed economies, not just Venezuela. That will change macro debates by more than a small amount.