Last week the Wall Street Journal reported an article of stimulus measures[A] debated amidst those concerned for the well-being of Japan and its ever deflationary mindset. The article raised my eyebrows given the ideas that some of the economic minds debated…essentially, it got my Spidey-senses tinglin.’
Before getting into the thick of it, essentially, they were measures to control growth of a society from a more blatant, centrally-planned point of view.
The underlying take-away is that those in-charge of monetary policy are growing thin on ideas of how to stimulate spending when the populace simply isn’t exactly in the mood. As I looked at Japan today versus its post-Real Estate Bubble, none of the QQE [as the BOJ calls their QE plan] has helped shock the populace into a new mental state-of-mind to spend…which unfortunately, was what the BOJ was trying to accomplish three years ago with what’s now known as Abenomics.1
The Ideas Debated:
[Apparently, Lil Wayne is Ben Bernanke’s new home-boy]. Simply, this would allow the BOJ to print money to lend to their Treasury in exchange for Japanese Treasuries with a perpetual maturity and zero interest payment also. My reaction to the effectiveness of this brilliant idea [sarcasm] is best expressed in this scene.2
Negative Deposit Rates.
[Since positive rates obviously are too cool for school these days]. This means that any Japanese depositor would be charged to deposit their money at the bank, rather than earn interest on it via a savings account. Any policy that de-incentivizes the principle to save is no good policy.
Money with an expiration date.
[From the guy who used to be a BOJ official himself]. It’s a government-issued card pre-loaded with money on it. The money has an expiration date thus, you either use it or lose it. Wow. I hope I can get a Ph. D. one day so I, too, can come up with equally unreasonable means to use money.
Forced wage hikes.
[This was from IMF economists. Woof.].
Ok, now wait. Just take a moment with me and think. Just look again at this list of ideas. Loooook at it.
Do ANY of those ideas even remotely sound like a responsible means to entice a populace to spend? The old model used to be work, save, earn interest your savings, and then spend.
Speaking of savings, one of the main components to the Japanese Real-Estate Bubble in the late 1980s was due to their disciplined savings. The Japanese have always been known for their discipline and it rewarded their banks with such a flush amount of cash on hand that it led those banks to logically lend it [in order to earn interest] but alas they, like every other society before them, lent to excess for too long.3
Now, we have some economic-minded-types tossing around ideas based on a new model: just give out money or charge the customer who deposits it, thus forcing them to want to either spend it or put it under their pillow. This is a far step from the economic principles of the US President Herbert Hoover who decisively chose to help businesses rather than give handouts to Americans during the Great Depression.4 & 4a
Anyway, what I see, is that Japan is trying everything under the sun to stimulate growth but part of the equation is out of their hands. A common and recurring symptom to any society that is fresh off a financial crisis that shocked them is a cautious and deflationary attitude. Now, arguably the Japanese are not exactly fresh-off their crisis, I understand.
Now, asset-inflation occurs in the markets due to quantitative easing, but that’s a short-term duct-tape approach to a vent that needs full structural repair. I’m not the only one out there with this perspective.
The other problem with any of these monetary experiments is they would all balloon the sovereign debt of Japan due to its central bank printing money like mad inevitably making the economy fall upon its own weight.
It should be stated here, that, our world and the policies being tossed around are no longer based on the old, classic principles for long-term growth for a society, nor its currency.
How could this be?
The demise of every society is due to the extensive devaluation of its currency. This inevitably results in having sovereign debts so large that the state cannot repay it. Unfortunately, the policies currently being debated would merely be like building a tall house on sand instead of rock… [Cough]…useless… which would inevitably lead to the house toppling over.
The only question I have for you is this; is Japan the only one who could be subject to using these stimulus measures?
Keep those brain biscuits turning,
Jos. G. Sellery
See Section labelled, “Changes in Bank Behaviour.”
[A] WSJ article ‘Ideas for Japan at Extremes’ by Eleanor Warnock. Published 5.12.2016