Re: BOJ poised to use free money

["Harry Veeder" <eo200@xxxxxxxxxxxxxxxxxxx>]

Title: Re: BOJ poised to use free money

The problem is not the interest. The problem is who is
or is not spending the interest.

Interest nudges the debter to produce soon rather than later
When the CB rate is too low production lags consumption.
Similarly when the CB rate is too high production gets ahead
of consumption.

However, for the system to be harmonized the consumer must be
spending some of the interest ( not identical to a dividend) otherwise
the economy becomes discordant regardless of interest rates.

Harry Veeder



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From: "William B. Ryan" <w_b_ryan@xxxxxxxxxxx>
To: pkt@xxxxxxxxxxxxxxxx
Subject: BOJ poised to use free money
Date: Wed, Mar 21, 2001, 9:39 pm

From: "Victor Bridger" <socred@xxxxxxxxxx> To: "William B Ryan" <william_b_ryan@xxxxxxxx> Subject: Fw: The Age BoJ poised to use free money.htm Date: Wed, 21 Mar 2001 11:47:33 +1000
Hi Bill,
In case you did not see this I thought you may be interested. The reasons for this action are not so important as the fact that it demonstrates that it can be done. Douglas has been proved correct again. An injection of new money into an economy as suggested by Douglas for the purposes of "filling the gap" between prices and purchasing power can be done. If it can be done for one reason, it can be done for another. The difference is that Douglas' ideas were a positive approach which would not be inflationary and would see a reduction in prices, and not a defensive one as suggested here "using inflation to push up prices". In addition their idea is to "stimulate economic activity" which is not the purpose of the National Dividend or Compensated Price adjustment.
 
One comment that is interesting is that relating to the time when the BoJ abandoned their 18-month 'experiment'. The suggestion that "the abnormal policy was distorting economic activity and enabling inefficient, debt-laden companies to remain alive...", is quite astounding. I would have thought that Companies would only survive is there were sufficient sales of their products. The fact that they were debt-laden has no co-relation with their efficiency in terms of producing and selling. They may be inefficient in their operations and it is possible that without debt thay may have folded, but the fact that they had debt would add to their problems. The point is that any business no matter how efficient or inefficient operating on funds (which could their own savings) free or otherwise, will not survive unless there is a market willing to purchase.
 
So much for monetary policy to solve problems. What happens after zero? Do they start to pay people to borrow?
  

Vic