Japanese Prime Minister Shinzo Abe at the G8 summit in Heiligendamm. (Photo credit: Wikipedia)
For 20 years the Japanese economy has languished. Its stock market, once at 40,000, now is below 10,000. The solution? More of the same medicine that hasn’t worked! It’s insane. At least one intelligent soul has written about it, in The New York Times no less. He calls such policies “unusual”:
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.
It hasn’t worked. For 20 years it hasn’t worked. So now, Japan’s former prime minister has a great idea:
In a speech in Tokyo on Thursday, Mr. [Shinzo] 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.
Abe wants to do even more. He proposes that Japan’s central bank buy construction bonds to finance public works, thus injecting new currency directly into the economy. I’m not making this up:
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.
And, of course, the chorus of Keynesians thinks that’s a great idea – do more of what hasn’t worked:
“It’s been long coming, but we finally have hope for change,” said Kikuo Iwata, a professor in monetary economics at Gakushuin University in Tokyo and a longtime advocate of more aggressive easing. “If Mr. Abe becomes prime minister, he will not let the Bank of Japan play defense any longer.”
That’s it. We have to go on the offense. We’ve got to push harder on the string. That’ll work. No more defense!
See how it’s worked in the past:
Japan has never recovered from its bubble economy of the 1980s, when stock and land prices quadrupled, only to tumble to almost prebubble levels as the country sunk into economic stagnation in the 1990s…
Even as the central bank pumped banks full of money, bank lending hardly rose, and spending and investing remained depressed. Japan remained mired in deflation.
Mr. Abe is a politician. He must be running for something in order to justify promoting such untainted foolishness. Indeed, he is. He’s thinking of running for prime minister again. His platform: “Easy money Abe.”
I told you Keynesians are insane. The inmates want to run the place.
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