THIS IS WHERE PK'S SHOULD BE ON THE ATTACK.
THE MAINSTREAM HAS TOTALLY MISSED THE MARK HERE,
AND IS HIGHLY VULNERABLE. THE HOOK IS SET VERY
DEEP, AS THEY ARE TOTALLY COMMITTED TO THIS
VIEWPOINT THAT HAS NO APPLICATION WHATSOEVER
IN THE CONTEXT OF TODAY'S FLEXIBLE EXCHANGE RATES.
THIS SO CALLED 'QUANTITATIVE EASING' CAN BE SHOWN,
OPERATIONALLY, TO HAVE NOTHING TO DO WITH THE
REAL ECONOMY, APART FROM (MARGINALLY) REDUCING
BANK EARNINGS. THE ENTIRE FOUNDATION THAT SUPPORTS
THE MAINSTREAM VIEWPOINT CAN BE SHOWN TO NOT EXIST.
HERE'S A LETTER I HAD PUBLISHED
BY THE FT A WHILE BACK AND IS NOW ON MY WEBSITE:
Quantitative Easing is Simply a 'Bank Tax'
Letters to the Editor - Financial Times; Feb 23, 2001
By WARREN B. MOSLER
From Mr. Warren B. Mosler
Sir, The Group of Seven's call for monetary easing to
solve Japan's economic problems seems to misunderstand
bank mechanics. I suspect that most who advocate
quantitative easing do not recognize that it is but a
"bank tax". The purchase of securities by the Bank of
Japan reduces private sector holdings of Japanese
government bonds and increases member bank reserve
account balances at the BOJ. As reserve accounts do
not earn interest, banks are left holding a higher
percentage of their capital in these non-
interest-bearing BOJ accounts.
Quantitative easing would reduce the interbank rate in
Japan from 0.25 per cent back to 0 per cent. But,
since lending is not reserve constrained, loans would
increase only to the extent that lower interest rates
would attract additional borrowers. Recent experience
shows that to be negligible. Furthermore, since Japan
is a large net payer of interest on its public debt,
cutting rates reduces government interest payments and
therefore private sector income.
Warren B. Mosler, Principal, AVM LP, 250 So Australian
Avenue, W Palm Beach, FL 33401, US
SEND YOUR LETTERS AND COMMENTS TO ANY AND ALL
AVAILABLE MEDIA ASAP!
01/26 07:14
Shiokawa Urges Monetary Easing to Raise Prices
(Update2)
By Kae Inoue
Tokyo, Jan. 26 (Bloomberg) -- Japanese Finance
Minister Masajuro Shiokawa said the Bank of Japan
should pump more money into the economy to help the
government restore prices to 1997 levels.
Consumer prices in the world's second-biggest economy
haven't grown in four and a half years and property
prices in the country's six biggest cities have fallen
70 percent since 1990. To raise prices, the central
bank and the government should have closer policy
goals, Shiokawa said.
``The government is trying to increase prices,''
Shiokawa said, appearing on a Fuji Television program.
The Bank of Japan should aim to increase the supply of
money into the economy to support the policy, he said.
With the country's public debt approaching 140 percent
of gross domestic product and little room left to
boost spending, some politicians and government
officials are pressing the central bank to do more to
spur growth.
Heizo Takenaka, Japan's minister for financial
services, called on the Bank of Japan to increase the
money supply in comments yesterday at the World
Economic Forum in Davos, Switzerland. While the BOJ
has increased the amount of money it's made available
to banks, the supply of currency in circulation has
risen only 2 percent to 3 percent, Takenaka said.
Some ruling Liberal Democratic Party legislators have
been urging the central bank to adopt an inflation
target, which implies pumping cash into the economy
until prices will rise by a targeted amount.
Setting targets, such as increasing prices by 2
percent a year, will create ``side-effects'' that
could strain government policies, said Shiokawa,
without elaborating.
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