There is gold in Asia, at least gold of the intellectual variety for anyone who wishes to see it. The Chinese offer us perhaps the purest view of monetary conditions globally, where RMB money markets are by design tied directly to “dollar” behavior. It is, in my view, enormously helpful to obsess over China’s monetary system so as to be able to infer a great deal about the global monetary system deep down beyond the “event horizon.” The Japanese provide us instead with an almost perfect demonstration of what happens when authorities don’t do all that.

The Bank of Japan stands out for its incompetence even among the cohort of central banks, which is really saying something. For an industry that can’t get much of anything right, being near or at the top of that list is a truly dubious distinction, much less staying in that position for so long. The FOMC was absolutely correct in 2003 to criticize BoJ actions but not for the reasons they thought. The Fed was merely several years behind in making the same mistakes.

If there is one success of QQE it surely has been how it restarted the performance benchmark for Japanese monetary policy. Practically no one remembers that QQE was at best QE10, at worst QE22. Restarting the clock, so to speak, by committing to the big one, its colossal size and open ended structure, was practically a “do over” that might have been enormously helpful had Japanese economists understood anything more than textbook Economics. Instead, all QQE really did is prove without a doubt they really don’t know what they are doing.

We might often forget that QQE was but the tool rather than intent. Central bank orthodoxy works on credibility and expectations, meaning that under ideal circumstances monetary policy declares a thing and the rest of the markets and economy create that thing simply because they believe the central bank will if forced to. If everyone believes that a central bank is all-powerful, or at least something close to it, then if that central bank declares 1% inflation to be its target 1% inflation it is very likely to find.