The View From 1776

Bank Of Japan Still On The Wrong Path

Monday’s stock markets around the world were given a probably temporary bump upwards by Japan’s central bank’s announcement that it was swallowing the Federal Reserve Bernanke pig whole. The Bank of Japan revised its QE3-style fiat money creation target sharply upward.

For an explanation read this article, published in 2002, but still on target.


After decades of “miracle” economic growth since World War II, Japan’s economy abruptly faltered in 1990 and has stagnated since. Why? Neither the Keynesian nor Monetarist explanations can provide an account. Only the Austrian theory of the business cycle provides the explanation.

Posted by .(JavaScript must be enabled to view this email address) on 11/03 at 02:48 PM

    "In Austrian theory, the recession is necessary, and once it sets in and bad investments are liquidated, the economy will self-correct. After 10 years, there are still no signs of economic correction. Austrian theory recognizes that time is required for economic self-correction but that the correction can only occur if the market process is allowed to work. Rothbard (2000) summarized the Austrian policy position this way:

    'If government wishes to alleviate, rather than aggravate, a depression, its only course is laissez-faire—to leave the economy alone. Only if there is no interference, direct or threatened, with prices, wage rates, and business liquidation will the necessary adjustment proceed with smooth dispatch. Any propping up of shaky positions postpones liquidation and aggravates unsound conditions.' (p. 185)

    As described above, Japan's government has done everything but leave the economy alone and allow self-correction."

    If we look back to recent American experience, over the last 6 years, the trillions spent on the Fed's "Stimulus" and the "corporate bailouts" has primarily ballooned our national debt, enriched the top .1% of Wall Street speculators, burdened the Middle Class, and done little to correct the underlying problems.
    Posted by BILL GREENE  on  11/04  at  09:51 AM
  2. Bill, regarding the last paragraph of your comment, if you are are true believer in Godless, materialistic liberal-progressivism, actual results don't matter. All that counts is what you intended to happen.
    Posted by .(JavaScript must be enabled to view this email address)  on  11/04  at  10:01 AM
  3. So True, Thomas. But, for those Godless, meddling, progressive liberals it also must feel good and make them feel good about themselves!

    On second thought--there are 2 species of big-government liberals:

    1.) Those who want to feel good about their supposedly kind and generous and noble programs. These are the useful idiots who support policies that appear to have good intentions even if they fail, and

    2.) Those who use the catch-phrases of liberalism to manipulate the system for their own benefit. Politicians, such as Ted Kennedy, always want to help the sick, the needy, the lame, the aged, and, of course, the Children! But it's just pandering to the gullible. Also, there are all their cronies within the Washington/Wall Street clique who line their pockets and bail out their businesses by running the economy, the SEC, The U. S. Treasury, the Fed, Fannie Mae, etc., etc. The latter don't even have to talk the talk--they just mumble jargon about creating jobs, saving the Middle Class, and kick-starting the economy--all while fleecing the nation.
    Posted by BILL GREENE  on  11/04  at  10:48 AM
  4. Bill and Thomas,

    Thomas's 14 year old article shows that the Japanese have finally realized that the Austrian theory is bankrupt and that they need to try a little stimulus, such as what saved our bacon after the recession of 2008.

    Bill is not correct that the stimulus "ballooned our national debt." The deficit is actually rapidly declining, thanks to the quantitative easing that has brought our economy back to life. Compare the condition of our economy with those of Europe, where the Austrian austerity theories are still embraced which is driving their economies into the ditch.

    Fortunately, US economic indicators are all good. Unemployment is way down, the stock market is high, gas prices are in decline, inflation is low, productive is 2.3, 248,000 jobs were created last month, etc, etc.

    Not bad, even if these results were brought to you by the evil "liberal progressives."
    Posted by .(JavaScript must be enabled to view this email address)  on  11/05  at  11:22 AM
  5. JJay,

    You are conflating two separate things--the national debt and the annual deficit. I am totally 100% correct that the national debt has "ballooned" each and every year under Obama. The deficit has gone up and down, and may have declined lately, but whether the decline may be called "rapid" is debatable. And there is no evidence that the trillions spent on the stimulus packages "saved our bacon," and I submit that when you accept the fact that those trillions have to be paid back someday, the stimulus funds will certainly have done more harm to us than good.
    Posted by BILL GREENE  on  11/05  at  11:53 AM
  6. Mr. Jay, to say that the article "shows that the Japanese have finally realized that the Austrian theory is bankrupt and that they need to try a little stimulus, such as what saved our bacon after the recession of 2008" is wide of the mark on both counts.

    • Japan has tried nothing but increasing doses of Keynesian inflation efforts since 1999; the recent policy move was just to ratchet up the dose of fiat money creation.

    • The Fed's actions in supplying temporary liquidity, an appropriate function for a central bank, kept us from a complete melt-down in 2007-08; but the Fed's Keynesian policies since then have hampered the recovery, kept ordinary people from finding jobs, and unjustly enriched Wall Street speculators.
    Posted by .(JavaScript must be enabled to view this email address)  on  11/05  at  03:33 PM
  7. Bill,

    The deficit and debt are, in fact, related in that the debt increases faster when the deficit is larger. So, you are correct that during the height of the 2008 recession the high deficit increased the debt ("ballooned" to use your picturesque term), the fact that the deficit has now steeply declined means that the the debt is no longer "ballooning."

    Secondly, most of the stimulus funds have already been returned to the treasury, with interest, by those companies, such as GM, that were bailed out. So, it is a misunderstanding to say that the stimulus "will certainly have done more harm than good." As noted by Thomas in his comment #6, above, the stimulus is what prevented the country from repeating the experience of the great depression.

    Thomas, your contention that the Fed's Keynesian policies have "hampered the recovery" is correct in the sense that the Fed employed too little stimulus due to the political pressure of the benighted who insist that austerity is the path to recovery. Had there been more stimulus, the recovery would have been faster and deeper.

    The contrast between Europe's recovery and our recovery is about as clear a test of the merits of austerity v.s. Keynesian thought as you can desire. To continue to contend that Europe's austerity regimen has been more successful than our Fed's Keynesian approach is to argue that black is white!
    Posted by .(JavaScript must be enabled to view this email address)  on  11/11  at  07:41 AM
  8. JJ,

    Your reasoning is, to use the great El Rushbo's words, "mind boggling!"

    In your first paragraph you concede that the debt has gone up every year under Obama, thus reversing your original comment that I was "incorrect." Then you go on to say that since the deficit has "steeply" declined, the national debt is no longer "ballooning." Thus the question becomes: Is your "steeply declining" more significant than my "ballooning? I think not! If I had written "an escalating ballooning of debt" you might have a shred of a point.

    Now, when you blow up a balloon, it gets bigger, no matter how fast it expands. Therefore our debt is ballooning, getting bigger every year. You try to ridicule this obvious fact by labelling it a "picturesque" term, but it is actually an accurate and scientific term imparting an almost visual idea of the national debts extraordinary and continuuing increase under Obama. And, through it all, a reader of your comment gets the impression that you still believe I was incorrect to bring attention to the constant rise in our national debt--as if your semantical objections somehow change reality.

    Then, you proceed to para #2 where you incorrectly assert that "most of the stimulus funds have already been returned to the treasury." "Most" would, to any grammarian, mean that considerably more than half has been returned, which is not the case.

    Finally, you confuse Thomas' point about the original Fed funding of 2008-09, with the 6 years of failed stimulus that followed. While the original efforts to provide liquidity in 2008-09 may have helped, the 6 year continuation is a totally different kettle of fish. As Bill Clinton might say, "It all depends on what you mean by 'stimulation.'" But your assertion that more stimulus would have made the recovery faster is wholly without any supporting logic.

    In short, your twisting and parsing of words and facts represents the exact form of imprecision in thinking and debate that has given rise to the widespread belief that liberalism is a form of insanity.

    It grieves me to point this all out, because, as you may recall, I had hoped that 2014 would be the year that you saw the light, abandoned your irrational beliefs in Keynesian economics and the Democratic Party, and joined forces with the Right solutions for America. Fortunately, many others have, and the NEW Senate may show what can be done!
    Posted by BILL GREENE  on  11/11  at  04:07 PM
  9. Bill,

    I realize 2014 is almost over, and I despair that there is little chance in the remaining month and a half that I will come to my senses with my irrational belief in Keynes. But we can continue to hope that lightning will strike and I will be converted into an Austrian who believes in austerity!
    Posted by .(JavaScript must be enabled to view this email address)  on  11/14  at  10:38 AM
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