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Abstract

NEVER MIND THE SIDE EFFECTS IMAGE1 "The greatest investing lesson for you during the past five years?" To this query of the CFA Institute, 59% of respondents recently replied: "Central banks and governments will continue to bail out troubled creditors." Lesson learned--and not just in America. The Bank of Japan, its arm twisted behind its back, agreed on Tuesday to target an inflation rate of 2%, not 1%, and to buy up Japanese government securities at a rate of 2 trillion yen ($22.6 billion) a month. Starting when? A year from now, said the BoJ through gritted teeth. Sooner, Prime Minister Shinzo Abe is likely to insist. Indeed, he has already pledged to replace the BoJ's current governor, Masaaki Shirakawa, with a candidate more in the image of Ben S. Bernanke. On Monday, Toshiro Muto, a former BoJ deputy governor and current contender for the governorship, declared that no policy measure should be considered "taboo." "The top priority for Japan is to defeat Deflation, even if there are side effects," Muto told reporters. Shirakawa leaves in April. Easy and easier money has raised up animal spirits across time zones and asset classes. In the 2008-09 credit liquidation, the asset-backed commercial paper market seemed to disappear. Now issuance is bounding back, as a glance at the table to the right will show. According to a new Bloomberg survey, bullishness on stocks stands at a 31/2-year high. Also according to Bloomberg, yields on speculative-grade credits in emerging markets "are now within 0.1 ...

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