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There is a country that is the poster child of fast and loose monetary policy - Japan. No matter how many rounds of QE, the Japanese economy has yet to grow in

by yarou 11y ago

There is a country that is the poster child of fast and loose monetary policy - Japan. No matter how many rounds of QE, the Japanese economy has yet to grow in real terms. [1] This is further exacerbated by the fact that the younger generation are not marrying and having children, which leads to a demographic nightmare. Overall, the USA's future is looking a lot like Japan's present day situation. The solution is to return to the original Bretton-Woods system, where countries had a fixed interest rate regime tied to gold (or cryptocurrency, whatever commodity works best in this modern era) instead of the dirty float systems that are routinely used around the world. [1] http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG

wbl 11y ago
That's just not true. Japan had extremely low inflation for 20 years, showing that the central bank wasn't expanding the money supply anywhere near fast enough. If the central bank really was increasing the money supply, but not real GDP, there would have to be inflation due to the velocity-of-money equation. Japan's real problem has been a failure to deregulate the economy. It's essentially trapped in the 1970's, but without the inflationary crisis and political moment that produced the Thatcher and Reagan era reforms. (Source of inflation data http://inflationdata.com/articles/historical-inflation-rates-japan-1971-2014/ http://inflationdata.com/articles/historical-inflation-rates...)
- yarou 11y ago
  I may not have been clear in my earlier reply, but I am not really talking about inflation. Rather, I am providing an example that demonstrates the futility of expansionary monetary policy when an economy hits the liquidity trap. I agree that Japan's economy is not deregulated in the sense that there is a high degree of nepotism between politically-connected families (especially those that have ties to organized crime or right-wing nationalist groups) and elected officials.

by yarou 11y ago

wbl 11y ago

That's just not true. Japan had extremely low inflation for 20 years, showing that the central bank wasn't expanding the money supply anywhere near fast enough. If the central bank really was increasing the money supply, but not real GDP, there would have to be inflation due to the velocity-of-money equation. Japan's real problem has been a failure to deregulate the economy. It's essentially trapped in the 1970's, but without the inflationary crisis and political moment that produced the Thatcher and Reagan era reforms. (Source of inflation data http://inflationdata.com/articles/historical-inflation-rates-japan-1971-2014/ http://inflationdata.com/articles/historical-inflation-rates...)

yarou 11y ago
I may not have been clear in my earlier reply, but I am not really talking about inflation. Rather, I am providing an example that demonstrates the futility of expansionary monetary policy when an economy hits the liquidity trap. I agree that Japan's economy is not deregulated in the sense that there is a high degree of nepotism between politically-connected families (especially those that have ties to organized crime or right-wing nationalist groups) and elected officials.