The Bank of Japan (BOJ) turned many heads just before the weekend when it abruptly announced that it would be installing negative interest rates. With one quadrillion in the red, a weakening economy and a failing Abenomics plan, the Asian powerhouse has tried an array of tools in its arsenal, but nothing has worked out.
In order to spur growth, the BOJ said it would be slashing interest rates to minus 0.1 percent, and warned that it could go further into negative territory should the economy experience further declines. It boggled the minds of many, and it prompted pundits to call it desperate, futile and “economic kamikze.”
Most people realize that the concept of subzero interest rates is a failed policy. Many countries have tried it, and it’s barely pushing up the numbers. Central bankers don’t care. They’re smarter than you, remember?
Heck, even former MLB all-star Jose Canseco gets it! Far from being the next Ludwig von Mises or Ron Paul, the former home run king understands just how dangerous this kind of monetary policy is. On Wednesday, Canseco was busy on Twitter criticizing the move.
Here are a few of the tweets he has sent out in the last day:
Negative interest rates in Japan is blowing my mind
— Jose Canseco (@JoseCanseco) February 4, 2016
“Negative interest rates in Japan is blowing my mind.”
Who is advising Japan? Forcing banks to lend all ¥ will not get 2% inflation. It creates loanees market with even lower rates. Dumb move
— Jose Canseco (@JoseCanseco) February 4, 2016
“Who is advising Japan? Forcing banks to lend all ¥ will not get 2% inflation. It creates loanees [sic] market with even lower rates. Dumb move.”
Bank of Japan should call them willie wonka bonds “YOU GET NOTHING. yOU LOSE!”
— Jose Canseco (@JoseCanseco) February 4, 2016
“Bank of Japan should call them willie wonka bonds “YOU GET NOTHING. yOU LOSE!”
Now, if you want a better explanation of why negative rates are terrible, here is a brilliant piece of writing from renowned economist Walter Block:
“A basic principle of Austrian economics is that the originary rate of interest (the rate of discount of future goods compared to present, otherwise identical, goods) can never be negative. The reason for this arises not because capital is productive, nor out of man’s psychology. Nevertheless, in spite of the foregoing, there are many benighted souls who insist upon the possibility of a negative rate of originary interest. They are continually discovering cases which “prove” their conclusion. The number of such examples has reached such proportions that it seems advisable to take account of them in a systematic way. Accordingly, this paper is devoted to classifying them in a manner that makes the most intuitive sense: in accordance with the economic errors which are necessarily committed in their very statements.”
Will the Japanese stand for it? Higher taxes, negative rates and considerable growth in the size and scope of government. They have a saying that Japan has been a zombie economy and has maintained a zombie banking system since the “lost decade” of the 1990s. Well, if the people of Japan rebel then they’re just a bunch of zombies, too.
Photo by Silent Sensei via Wikipedia.
Leave a Comment