Deflationary fiscal versus reflationary monetary: who wins?

Japan has joined the crowd and started an even more aggressive asset purchase program as the Japanese economy weakens. Meanwhile, serious tax hikes are poised to go into effect very soon. Japan plans to cut state spending because the country could run out of money in a month as deficit hawks are on the warpath. This juxtaposition between reflationary monetary policy and deflationary fiscal policy is evident everywhere in the developed economies.
As I wrote last Friday:

Right now, every majo...


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