While Richard Koo is an employee of Nomura, or a bank which is among those who stand to benefit the most from the BOJ’s doomed Banzainomics experiment, he has less than kind words to say about this latest and greatest demonstration of sheer desperation by Japan’s Prime Minister, whose tenure may not be all that long – something which perhaps he is not very much against, as Abe is hardly looking forward to being named in the history books as the person who dealt Japan’s economic death blow.
To wit:
When evidence meets faith, it doesn’t stand a chance
When a year and a half of aggressive quantitative easing failed to produce a recovery in private demand for funds, the government should have realized that the answer to the economy’s problems was not in monetary policy and shifted its focus to the second and third arrows of Abenomics.
But the reflationists in academia and bureaucracy who are unable to accept thatmonetary policy is powerless in a balance sheet recession have basically said that if one pill doesn’t cure the patient, try two, and if two don’t work try four, 16, 256….
Most patients would start to question the doctor’s diagnosis before they agreed to swallow 256 pills. But such voices have been erased from Japan’s policy debate.
ECB President Mario Draghi quipped in a press conference on 6 November that “when evidence meets faith, it doesn’t stand a chance.” For those who believe monetary policy is always effective, no amount of evidence that there are times when monetary policy does not work will convince them otherwise.
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