A Yen for Cash: How the Bank of Japan Could Threaten the Global Economy
Japan has been an experiment in economics ever since its crushing defeat at the end of World War II. First, Tokyo employed inventive techniques to rebuild its economy and wealth – the export-led, state-directed system in which bureaucrats “targeted” industries for special support – that broke with economic tradition and became a development model for the rest of the region to follow. Then after the country’s massive stock-and-property-price bubble exploded in the early 1990s, Japan became a much-examined case study in how to handle (or not handle) a financial crisis. After that, economists have puzzled over why Japan has been unable to escape the long stagnation it has suffered ever since. Now Japan is embarking on yet another set of unconventional policies in an attempt to revive itself, which, if successful, could rewrite the rules of fiscal and monetary policy. Whatever the result, economists will likely be studying Japan for decades to come. On Thursday, the new governor of ...
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Can the U.S. Dollar Become Almighty Once Again?
Financial turmoil in Cyprus, where the parliament rejected a plan an eurozone bailout deal that would have taxed bank deposits, is prompting investors to shift cash from the euro zone to the U.S. That’s boosting the value of the dollar — and it’s just the latest installment in a story that has helped the dollar strengthen for more than a year. Despite gridlock in Washington and a string of economic mishaps, the dollar has risen by 7% since late 2011. That’s a striking turnaround for a currency that was in relentless decline for decades. If the upward trend continues – and there are good reasons to think it will – then the U.S. dollar could become almighty once again. The dollar’s decline over the past 30 years has been far greater than most Americans realize. It has lost almost half its value against other major currencies since 1985 and is down 33% in the past 11 years alone. Indeed, the value of the U.S. dollar is lower today than it was in 2009 when the recession ended. ...
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Why the Elites Are Losing Sleep
Who says nothing gets done at the World Economic Forum in Davos, Switzerland? As the weeklong winter fest, which costs tens of thousands of dollars to attend, has grown over the past decade, it has become as much about dealmaking as about brainstorming solutions to the world’s problems. In fact, gray-suited consultants slipping around the Magic Mountain in their city loafers now seem to outnumber genuine thought leaders (to use a very WEF term) by about 2 to 1. Still, the elite haven’t abandoned Davos. This year’s shindig drew several heads of state, the world’s top bankers and a good helping of Fortune 500 CEOs, Nobel laureates and rock-star entrepreneurs (though, for once, no rock stars). Davos remains, as Foreign Policy Group CEO David Rothkopf put it, “the factory in which conventional wisdom is manufactured.” And so it is in that spirit that we offer this year’s best takeaways, factory-direct. A New Bubble? We are now in historically uncharted territory in terms of how ...
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The Great Central-Banking Experiment: Will Unlimited Cash Solve Problems or Cause Them?
The Bank of Japan folded as easily as a hot slice of New York pizza. After a few weeks of pounding by newly installed Prime Minister Shinzo Abe, the BOJ’s (officially independent) managers capitulated on Jan. 22 to his demands that the central bank hike its inflation target to 2% (from 1%) and undertake the necessary monetary easing to meet that target. That means the BOJ will keep printing cash until Japanese deflation is reversed. “One can say that it marks a ‘regime change’ in managing macroeconomic policy,” a victorious Abe declared. A regime change it is, and it isn’t just taking place in Japan. With the BOJ’s surrender, all three of the world’s major central banks have committed themselves to open-ended, cash-pumping programs to stimulate economies and protect financial stability. The Federal Reserve has pledged to keep easing until the U.S. job market improves. And in September, the European Central Bank promised to purchase unlimited amounts of certain government ...
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The Great Central Banking Experiment: Will Unlimited Cash Solve Problems or Cause Them?
Bank of Japan folded as easily as a hot slice of New York pizza. After a few weeks of pounding by newly installed Prime Minister Shinzo Abe, the BOJ’s (officially independent) managers capitulated on Jan. 22 to his demands that the central bank hike its inflation target to 2% (from 1%) and undertake the necessary monetary easing to meet that target. That means the BOJ will keep printing cash until Japanese deflation is reversed. “One can say that it marks a ‘regime change’ in managing macroeconomic policy,” a victorious Abe declared. A regime change it is, and it isn’t just taking place in Japan. With the BOJ’s surrender, all three of the world’s major central banks have committed themselves to open-ended, cash-pumping programs to stimulate economies and protect financial stability. The Federal Reserve has pledged to keep easing until the U.S. job market improves. And in September, the European Central Bank promised to purchase unlimited amounts of certain government bonds ...
abe
boj
brothers
committee
commodity
deflation
development
draghi
ecb
economists
european
experiment
federal reserve
government
inflation
jan
japan
japanese
lehman
mario
minister
oecd
paris
policy
president
prime
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stability
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