Sean Corrigan of Diapason Securities excoriates this idea quite well; a portion of which follows.
Rather than pretending to a level of insight into the scale of Japan's problems which neither we nor anyone else truly possesses at this stage of the disaster, we think it might be worth while instead to run through some general considerations of what ramifications might be felt in its aftermath.
Before we do, however, we cannot abstain from expressing our utter contempt for the many idiots who have already begun parroting the standard Keynesian nonsense that this calamity will ultimately 'prove positive for GDP', or that the rebuilding efforts can only redound to the nation's well-being to the extent that they shake it out of its ongoing 'deflation'.
As is their wont, such imbecile Cargo Culters are once again making a fetish of a coarse-grained statistic which is supposed—however imperfectly—to offer a rough measure of material progress being made in the real economy and not the converse, leading them to lose all focus on what is actually happening to people's living standards and wealth accumulation.
Japan has been stricken with a huge loss of productive capital—as well as an appalling toll of human suffering—and this cannot do anything other than to leave the nation discernibly poorer and, by extension, to curtail its ability to make people across the world better off than they otherwise would be by offering them valuable goods and services as part of that beneficent mutual enrichment which is the international division of labour, conducted under conditions of free(ish) exchange.
Contrary to popular belief, the Japanese have not, in fact, been trapped in a deflationary slough of stagnation these past two decades as both the real and nominal supply of money have risen throughout his period (with the exception of the worst months of the GFC itself), while real per capita national income has also increased modestly, especially on a PPP, or TWI-adjusted basis. Granted, the consumer price basket has trended lower at a rate of less than 1% a year, but this is something which is presumably no more than a reflection of ongoing productivity gains—ones delivered, to boot, in a country formerly marvelled at for the extreme levels of its domestic pricing.
But, even were we to subscribe to this myth of secular slump, the idea that to eradicate a large quantum of people's possessions or to evaporate a sizeable fraction of their nest-eggs would be to contribute to their prosperity is to reckon that in futilely striving to heft his rock up the hill for all eternity, Sisyphus was the most tireless 'engine of growth' for Hades at large.
If you go to the trouble of cooking yourself a dinner, only for the dog to snatch it from the sill where you placed it to cool, do you congratulate yourself on your own good fortune as you troop back to the larder to begin again? If a sudden hailstorm strips bare the groaning ears of your wheat crop the day before you were due to harvest it, do you cheerily go about preparing the field for replanting, content in the knowledge that your doubled labour is being duly recorded in the plus column by a mindless government data-gatherer?
After all, if the awful spectacle of vast swathes of land littered with shattered buildings and crumpled vehicles—or the concern that they suffer the invisible hazards of radioactive contamination—offers such grand opportunities for advancement, why stop there?
Why wait for the vagaries of the climate, or the tortured creaking of continental plates to bring about such a 'stimulus' to growth? Why not declare war on ourselves and unleash our titanic arsenals of destruction on our own towns and cities, and rain down hellfire upon our own farms and gardens, razing the first to the ground and sowing the last with salt, until we make a self-inflicted Carthage of them, one in whose midst we can hope to become rapidly richer than our neighbours as, shivering and starving, we pick our way among the debris of our former civilisation to the nearest construction site?
This is all such arrant nonsense that you should banish from your consideration, henceforth and forever, all of the jejune scribblings of the fool whom you once catch propounding it!...
…It is not Yen that Japan now finds itself short of, but potable water, medical supplies, bridging materials, constructional steel, and electric power. The BOJ cannot help deliver these more readily or more efficiently by debauching the currency via its attempt to divorce financial asset prices from the diminished earning potential they incorporate.
Similarly perilous is the incitement this will give to the pump-primers elsewhere in maintaining- or even extending—their own easing programmes. Nor will they be consistent in this for, if they conveniently ignore the rise in food and energy prices, they will just as conveniently point to any liquidation-induced falls in these groupings to confirm the accuracy of their interpretation. On top of this, the many extant doves will be only too happy to protract their tenure as supposed saviours of the universe by enacting extra easing measures should Japan's woes conspire to slow the upward momentum in the local recovery
Do not write-off QE-III just yet.
Trade Date: 3/18/11
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