BOJ’s Shirakawa discovers that his policies have, predictably, not worked

This is about as close to an admission that economics is more voodoo than science as one can get from the financial elite.  And while we hate to pick on Shirakawa, given the failure of his policies, he deserves it.

Bank of Japan Gov. Masaaki Shirakawa said Tuesday the comprehensive credit easing policy introduced by the central bank in October 2010 has not yet sufficiently fed through to the real economy due to low growth expectations among firms and households. “The powerful credit easing has generated extremely easy financial conditions for firms and households,” but the policy’s effect on the real economy is “not enough,” Shirakawa said at a parliamentary session.

That’s because companies and households are not investing and spending money amid low growth expectations, Shirakawa said.

The central bank will do its utmost to keep credit conditions lax, Shirakawa said, but added that raising the growth rate “is the biggest challenge” for the economy.

The central bank has been buying a variety of financial assets–from government and corporate debt to exchange-traded funds and real-estate investment trusts–in a bid to lower interest rates and risk premiums.

The BOJ in October decided to boost the size of its asset purchase program by Y5 trillion to Y55 trillion.

Of course, the failure of modern-day Keynesian policies, the basis for Shirakawa’s asset purchase program, is the assumption that increasing the supply of something will lead to an increase in demand. That might be true for iPads if the increase in supply was accompanied by a decrease in price, but it doesn’t hold for credit, especially when excess credit is a primary cause of economic malaise.

Unlike governments and central banks, households and businesses – which are required by law and the fundamentals of sound stewardship to live within their relative means or suffer the consequences – understand the need to deleverage, to reduce their exposure to debt.  More debt is simply not the solution for too much debt and it should not take a degree in economics from the University of Chicago to understand that.

We could give Shirakawa a break because, after all, he is a rather weak player in the central bank game and it would be difficult for him to go against his more prominent fellow central bankers.  But we refuse for the simple reason that Shirakawa is well educated and should literally know better.  The fact that he is compliant with the financial globalists at the BIS, the US Federal Reserve, and the European Central Bank means that he is also complicit in the financial ruin being caused worldwide.

“A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army…We must not let our rulers load us with perpetual debt.” – Thomas Jefferson

“Central banks were supposedly the guardians of money. Yet, they have created the biggest liquidity bubble in history.” – The Economist

“Regarding the Great Depression, you’re right, we did it.” – Ben Bernanke, US Federal Reserve Chairman

And, indeed, they have done it again and Shirakawa deserves as much of the blame as anyone.  He chose to protect the global and Japanese moneyed interests rather than the Japanese nation and its people.

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