Essays 文章 作文
Thought experiment: what if you print Japanese banknotes like crazy?Japan is said to have been in recession for over 20 years. What's causing it? Could it be supply being constantly exceeding demand making every new product debase the value of existing products? Or could it be an absolute decline of demand due to the dwindling population of Japan? Or could it be that Korea and China have started to make better products cheaper flooding the Japanese market? Or could it be that the leisure class doesn't want to spend money or time in Japan where the natives spend most of their time just working hard to survive?
Whatever the cause, it is clear to every one that Japan currently has a huge pool of unmet demand. For example: the demand of people in Tohoku and Kanto to relocate in Western Japan to escape from radiation, the demand for a detailed contamination map of Tohoku and Kanto; the demand for decontamination work in various parts of Japan where such an effort can be justified, the demand for reconstruction, repair of wrecked houses, fishing boats, and destroyed businesses, and above all the demand to safely decommission all of the nuclear power plants in Japan not just the ones that are currently leaking radioactive nuclides. Exactly how much money is needed to meet all these demands is not clear. But for starters, let us say 100 trillion yen, roughly one fifth of Japan's GDP.
Americans love to cite the dictum: there is no such thing as a free lunch. I don't know who said that first; neither do most of the Americans who love to cite it over dinner table, I imagine. But as I recall, it was Keynes who said that economic theories are already outdated by the time they have prevailed among ordinary people, although the same thing can be said of Keynes himself in the current global economic environment where his remedies don't seem to be effective at all.
Forget Keynes. Forget free lunch. Japan is in an emergency. The maximum legally allowable dose of one milli-sievert per year is based on the calculation that a Fukushima type disaster can only happen once in 100 thousand years. Now that such an event happened, we should consider an emergency measure: that is to ask the Bank of Japan to print yen bills out of thin air. The sum for starters is 100 trillion yen.
A disasterous economic policy!
Illegal under current law!
Such an action will certainly trigger hyper inflation!
Yen and the bond market will crash!
Capital flight will be inevitable!
I can imagine the red faces of economists screaming loud in outrage. Let me state in passing that I have absolutely zero respect for economists. They believe they are doing science, but not so. Decent science can arrive at a consensus while economists never do. They are more like theologians who argue forever amongst them over the concept of God. Be that as it may, back to the thought experiment of printing 100 trillion yen out of thin air.
Imagine a spaceship maneuvered by space aliens millions of light years more advanced than humans. They can fly over Fukushima without any harm to themselves, because they've discovered ways to neutralize radiation a long time ago. As they fly over Fukushima they are beaming down cash into the bank accounts of people who need help. Look! They just transferred 20 trillion yen to the personal account of Mr. Yoshida, the commander in chief at the Fukushima Daiichi. He can now pay for whatever he needs out of his own pocket without getting permission from the board of directors at the Tepco. Workers are now clothed in high tech suits that shut out radionuclides completely. Clean up work is progressing like never before! The aliens know nothing of corruptions found among humans. Cash is injected into the accounts of those who need it, never to the pockets of corrupted officials. And exactly the right amount. Not one yen more not one yen less. Aliens, hallelujah!
Just imagine, an additional 100 trillion yen of demand has thus been created without indebting any one or any body. The size of Japan's GDP has become 20% bigger. Again, remember this is just a thought experiment.
Do you think Japan will have hyperinflation?
Do you think yen will collapse?
Or do you think that any of the objections of the economists cited above will materialize?
If you say you can't answer hypothetical questions, then I will go back to the real world.
Fukushima is supposed to be once in a 100 thousand year event. 100 thousand years is longer than the history of human civilization at least its latter end marked by technology and the use of fire. Why not just allow the Bank of Japan print as much as there is demand for in Japan without indebing its national government. If there exists any natural law that prohibits it, then I want to know what it is. And if it is a man made law, I want to know why such a law exists. Or is it a taboo for economists to talk about money creation? Hey, Krugman. Come out of the closet and tell the truth.
Of course there will be no hyperinflation. Hyperinflation occurs only when the people has lost faith in its nation's currency. An example is when the US bombs the shit out of Iraq in 2003 and its Air Force shipped many cargo loads of 100 dollars bills to pay the salaries of civil servants who had just lost their jobs working in Hussein's government. If bankers in the world decide to sell yen on the news of the Bank of Japan's move, let the Chinese dump their U.S. Treasury bills. I don't know where gold will go. Who cares. It's just a slab of shining metal.
(This is a modified translation of an essay I published in Japanese last year on this site.)