A Benjamin Cole post
Of the many lamentable aspects of modern macroeconomics is the cowardly defeatism, that only slow growth is possible, and if not that, then advisable.
So welcome is a recent white paper issued by banker BNY Mellon, which ponders a future in which the U.S., China, Japan, and India (the “G4”) come close to fulfilling economic growth potential—and not through heroics, but just by rising to past growth trends.
The return to mediocre G4 growth would add $10 trillion to their projected GDPs by 2020, and another $8 trillion in related growth outside those four nations.
One key paragraph in the BNY Mellon report catches the eye:
“Under Shinzo Abe, Japan now has its most stable government in almost a decade and a central bank that has twice surprised the markets with its determination to defeat deflation.”
I have agonized in this space a few times how long the “right-wing” or business class would abjectly genuflect to gold and tight money. This self-destructive monetary peevishness must certainly appeal only to ideologues, theoretical academics, pundits and traders who have shorted markets—and to no one in the real business world.
I have found in interviews with economists in institutional real estate circles that the worship of tight money is absent. And now banker BNY Mellon says that the Bank of Japan’s aggressive QE program is a good thing. How long until the tight-money fanatics are seen for what they are: anti-business cranks.
The Fed Is The Monkey Wrench?
So, we read that the People’s Bank of China has been practicing a type of QE all along and is now lowering rates and considering more QE, and of course the Bank of Japan is in the QE camp. After foot-dragging and destroying the economies of a few nations, the ECB is in QE too.
That leaves the Fed, which has quit QE and blindly painted itself into a corner by endlessly rhapsodizing about raising rates. So now a Fed return to QE would look like a “flip-flop” or institutional ineptitude or uncertainty.
Would you like another $18 trillion in global GDP?
Tell the ECB, the PBoC and the BoJ to pour it on, to go to QE hard and heavy, print way more money.
But mostly tell the Fed.