Courtesy of Mish.
Japan's grand experiment of decades-long QE coupled with Keynesian foolishness is about to take one last gigantic leap forward before it plunges straight off the cliff into a massive currency crisis.
Please consider the New York Times article A Call for Japan to Take Bolder Monetary Action
For years, proponents of aggressive monetary policy have offered this unusual piece of advice as a way to end Japan’s deflationary slump and invigorate the economy. Print lots of money, they said. Keep interest rates at zero. Convince the market that Japan will allow inflation for a while.
Japan’s central bankers long scoffed at such recklessness, which they feared would ignite runaway inflation. But now, the bank’s hand could be forced by an unlikely alliance of economists and lawmakers who have argued for Japan to take more monetary action after more than a decade of weak growth and depressed prices.
Championing their cause is the former prime minister Shinzo Abe, who is favored to return to the top job after nationwide elections next month. Otherwise deeply conservative, Mr. Abe surprised even his own supporters by calling for the Bank of Japan to be much bolder in tackling deflation, the damaging fall in prices, profits and wages that has choked Japan’s economy for 15 years.
In escalating remarks over the last week, Mr. Abe has said that he will press the Bank of Japan to act on government orders if his Liberal Democratic Party wins the Dec. 16 election and even rewrite Japanese law to reduce the bank’s independence.
In a speech in Tokyo on Thursday, Mr. Abe said he would call for the Bank of Japan to set an inflation target of 2 to 3 percent, far above its current goal of about 1 percent, with an explicit commitment to “unlimited monetary easing” — an open-endedness that has caused jitters among some economists. The bank’s benchmark interest rate should be brought back to zero percent from 0.1 percent, Mr. Abe added.
He went even further over the weekend, saying in the southern city of Kumamoto that he would consider having the bank buy construction bonds directly from the government to finance public works and force money into the economy, according to local news reports. That raises concerns, however, the bank may be called on to bankroll unrestrained spending on more roads and bridges that Japan does not need.
Economists cite several missteps by the central bank that have entrenched Japan’s deflationary mind-set and made consumers and businesses wary that the bank’s policies will stick. In early 1999, as the country’s economic woes deepened, the bank lowered a benchmark interest rate to virtually zero and said it would keep rates at zero until deflationary concerns disappeared. But an economic uptick in mid-2000 caused the bank to raise that rate to 0.25 percent despite protests from the government that the move was premature.
Monetarist Mush
Anyone who thinks an interest rate hike from 0% to .1% or even .25% has "monetarist mush" for brains. Seriously.
The NYT does not name the economists, but I have no doubt they exist. Highly respected (for no reason) Richard Koo is one of them.
I have written about Koo on numerous occasions. From Japan's decade long experiment resulting in public debt of a 1,000,000,000,000,000 yen (a quadrillion yen), Koo recons Japan failed to defeat deflation because it did not do enough!…
