The QE by BOJ is aimed to prevent the price of the natl bond from falling down. Most of the money from QE is deposited at the checking account of BOJ, not circulating in the market. It is monetization of the debt but not a financial policy to activate our economy at all.
It will be followed by the severe inflation like after WWII. The people was not informed about it. They are deceived of this fact by the government and the mass media.
The real wages as well s the GDP have been declining for some time. It means our economy is in the process of recession. The budget for civil engineering construction is not actually increased, as the government insists. Our budget has no room to increase that item. It was operated with replacement of items in the budget.
The QE will aggravate the injury to the economy when it collapses. It is not the question if it would occur but when it would occur is the question.
QE or Quantitative Easing or layman's term " add more debts to the existing debts by printing money" so that we have money to spend and the country will not collapse. . seems that politicians' way of in denial that they have no idea how to solve the mess but we are okay at the moment..
ReplyDeleteIn our country. the prime minister says we have balanced the budget which in reality say " we have less money to spend on running the needs of the country but have more money to pay for the interest owning on our increased debts but will not pay it down".
It's happening all over the world except Switzerland..
Wayne VA7AT
QE could be allowed as a measure to do with such as credit crisis in the financial market. But it should be continued only for a limited span of time. When it is carried on for long time or when the country has much debt, it could become monetization. Our country is facing the latter, I am afraid. Your government seems to do better than ours. I am sure, in any case, politicians are always tempted for monetization. I am sure when BOJ announces about the exit plan from QE, it will be the beginning of devastation.
DeletePS:Best Season's Greetings to you and yours!
DeleteShin, enjoyed short QSO this PM in NA. Our QE was a failure also and for same reasons. Money held in banks to increase reserves. We just can't seem to get the demand side going. Now we have very low gas prices. Looks like a long period of low growth and slow deflation. We (as Japan) need inflation to be able to pay off our big debt also. This whole thing doesn't look very promising. --Jim AC0OW
ReplyDeleteJim,
DeleteI don't think the inflation, once it occured, could not be controlled by the government or the main bank. I don't believe the expectation for inflation would lift the economy up. In Japan, inflation will increase the payment for the interest as soon as it occurs. It is really risky for us.
Thanks for the QSO. I am often on 40m around our sunset hours, that is, your mid night. See you soon again. Best Season's Greetings to you and yours.
Shin
This comment has been removed by the author.
DeleteShin,
ReplyDeleteThank you for your astute observations of the quantitative easing going on in Japan. In fact, such activity is going on all over the world, with central banks manipulating their currency in an apparent attempt to balance employment and aggregate demand. However, this is simply a misallocation of resources. The United States tried that to disastrous effect in the 1970’s. Now, we are trying it again. Only this time, everyone is trying it and we are in unchartered territory due to the unprecedented amount of such action. Eventually, printing all that money will lead to inflation, in this case hyper-inflation. At least, that is what history has demonstrated. For now, the government and those controlling the currency claim that we face deflation. They provide indices (controlled by them) to prove it, and use that as an excuse to continue their loose ways. For a clue about the effect of QE, take a look at our stock market. The government prints money, hoping that it will be invested in a way the increases employment and consumption. However, there is almost nowhere to put that money where it will earn a discernable return, except in public equities. As a result, the powers that get the money put it in the stock market, which looks great. They also use it to fund mergers, which decreases competition and forces economies of scale which result in reduced employment.
Sadly, it is people like you and me that will pay the price. As we age toward retirement, we will exist on savings and fixed income. Our previously elastic earning power is all but gone. The inflation that is sure to come will eviscerate our assets. Our purchasing power will be diminished and we can expect to have a static existence.
The above is a bleak prognosis, but I think a realistic one. Monetary control is not doing the general population any favors. Of course, the situation is considerably more complex than I have space to describe. The spend/borrow/print regimen is only part of the problem. Perhaps we can discuss other aspects at a later time.
Sorry to post such a downer. And, as has been the case I am too engaged with work and family to have much time for amateur radio. I do try to read your blog on a regular basis. My youngest son is set to graduate college this year, which may free up some time for pastimes.
A blessed holiday season to you and your family.
73,
Taylor
WA4APB
Tony,
DeleteThanks for a vluable comment. In most developed countries, i believe, they are facing the same problem. Ths basic issue is the diminished demand. But the politicians are trying to boost the economy with more supply. Even in the text of neoleberalism, QE is described to lift the economy for a while but will result in inflation. Our country has another serious issue, that is, the astronomically much debts the givernment has cumulated mainly with the civilian construction. The age of hyper elderly people has also started. It will burden the national economy for sure.
I could not help concluding the pessimism for the future in our country. Hyperinflation is inevitable. When will it occur? I don't know. it could be a domestic problem triggering that. Or rising risk premium or hedge funds investing to sell JPY etc may have it started. Not too long from now.
I should have continued working in order to hedge it. But it is too late. I might have to get it through in this countryside. When the lowered exchange rate of JPY for the other currencies may revive our export business, it may save us from the mess. But what a system will ensue? i think we should consider of that from now.
The gold market is hitting high, about 3 times of that a few years ago. I bet the market thinks there could be an inflation in the world economy occuring soon. Since there happened the credit crisis in the financial system in 2008, the governments have relied on too much of QE. IT must be a sweet temptation for politicians. I am afraid it would destroy the world economy completely if we let it go on as it has done for the past years.
Congratulations to you on finishing your duty for your son. I hope you will enjoy your retirement so much despite this looming economy over the world. let's wish for the better future and do anything for that from own standpoint.
Best season's greetings to you.
Shin
Excellent point regarding gold, Shin. While it is down considerably over the last couple of years, it remains very high in relation to 2005 (up nearly 300%) when our economy was doing quite well. Certainly an indicator of the real value of money. Also, Jim ACOOW makes a superb observation about inflation. The idea, however misguided, appears to be to create a “controlled” inflation that will effectively lower the amount of debt by cheapening the dollar. The problem is, the government continues to incur debt at a rate that far outstrips any inflation rate that could be sustained by the economy. And, there is no political will to curtail it. Once again, our generation is the recipient of the bad news.
DeleteTaylor