Macrobits by Marshall Auerback
The Limits To Quantitative Easing
Marshall Auerback
Tuesday, January 13, 2015
Marshall Auerback — The Limits To Quantitative Easing
Macrobits by Marshall Auerback
The Limits To Quantitative Easing
Marshall Auerback
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6 comments:
The population in Japan is shrinking, rapidly and it seems like the BoJ is trying to hoover financial assets at an unsustainable clip as the population shrinks to prevent a deflationary spiral. They are buying stocks, bonds and (indirectly) real estate.
From a population or social level, It seems like it would be better to spend the money on increasing reproduction. If they let the younger generations simply inherit the real and financial assets from their parents and become more financially secure they would likely increase reproduction rates. I don't know Japanese culture, but the statistics look bad on Women in the workforce. Increasing the number of women in the workforce would break down social barriers between the sexes. Maybe there are other barriers to reproduction that exist during the fertile years that could be addressed with more effect than using monetary policy to try and offset a catastrophic decline in the population.
Japan may be pushing up against the limits of population density for the culture. Japan as an island nation has no room to expand. One effect of population density is increased price of land, therefore, housing. This is an issue in Japanese cities.
http://data.worldbank.org/indicator/EN.POP.DNST
The policy prescription for a society where population and investment growth remains close to zero or even negative long into the future needs to be better thought out than QE, more exports and a few reforms.
As the boomer generations die off, the japanese population curve is really ugly. Unless they do something, within the next couple years and have lots of babies, the population will shrink quite rapidly.
What Japan has seen so far with economic stagnation as population growth turned flat since the 80s is NOTHING compared to what is coming. There are a ton of people reaching their median life expectancy in the 60-75 year age cohort and much smaller populations in subsequent cohorts replacing them. Something has to change. It is a pretty standard looking biological population curves only economics doesn't really have a plan for the dynamics that all populations of life exhibit on earth.
Also if a higher population density = higher prices of land then the opposite is true, then a banking system and monetary system designed on credit expansion and increasing asset values will always collapse when population stagnates or declines. So the economists have failed to design a system AGAIN. Fiddling with math models does not a stable credit system or labor market make.
I find this obsession with generating manpower quite disturbing. The planet has enough people.
The Japanese will solve the production problem with robots - and lead the way on the population curve as they have done with other things. Because they value the homogenous culture highly.
It really is time for people to realise that constraints are liberating. The fastest evolution happens when something *has* to be done.
Neil, I agree about population and also about the likely scenario for Japan. They are already big into automation robotics, which is a reason their productivity is relatively high.
The only other way is through immigration, and so far the Japanese have shied away from that for cultural reasons. The downside is a nationalistic bias.
Their economic issues are also cultural and institutional. Japan has it own class and power structure.
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