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Source link: http://archive.mises.org/10228/the-absurd-reduction-of-keynesianism/

The Absurd Reduction of Keynesianism

July 5, 2009 by

Japan considers abolishing cash in order to abolish interest. Not The Onion.

{ 25 comments }

Frank July 5, 2009 at 10:54 am

Scary stuff.

BioTube July 5, 2009 at 12:26 pm

And when this blows up like an atom bomb, they’ll be suggesting mandatory drug-fueled orgies to arouse our “animal spirits”. Next stop, dark ages.

Enjoy Every Sandwich July 5, 2009 at 1:10 pm

Perhaps it’s my lack of education (or my surfeit of government education), but there’s something I don’t get: why would a perfect stranger loan me money if they couldn’t make money from the loan? Is the Japanese government going to put a love drug in the water?

Rajesh Dhawan July 5, 2009 at 1:51 pm

Some dark humor.

What is the favourite movie of these Japanese politicians?

Kill Bill.

kmeisthax July 5, 2009 at 1:58 pm

Do they even know how freakin absurd -negative- interest is? It means taking out a loan and getting PAID over time.

Some dude July 5, 2009 at 2:16 pm

It sounds good to me. I could borrow a million and live of the interest.

Andrew_M_Garland July 5, 2009 at 2:27 pm

I read it this way. Japan wants to do the Keynesian thing, reduce savings held as cash. They think those cash savings are weighing down their economy. Instead, the money should be flowing around making everyone rich. So, how can they get people to stop holding money? Answer: charge them for the privilege.

So, they want to charge interest on bank accounts, to encourage people to spend their cash. But, this doesn’t work so well. Everyone would just withdraw their cash.

Aha! What if they could abolish cash, putting all holdings under the electronic control of the banks. Then, they could charge interest as they wished.

Moral: Beware of academic formula-pushers who would upset entire societies because their formalism and government control is more important than the lives of individuals.

I like this post by economist Arnold Kling

Gaining Power Through Public Policy

“The public policy expert is for decoration.”

Thinker July 5, 2009 at 2:33 pm

Yeah, that’s how you fix the economy-distend yourself from reality even more!

What’s more, they’re calling this “science fiction”, but even Star Trek had currency.

matt at anarchyjapan.com July 5, 2009 at 2:42 pm

Having lived in Japan for 15 years, I grow weary of yet another “weird Japan” article. If you read the article closely, you can see that the idea has no support. Japanese use cash much more than Americans. There’s no way people would go this.

This blogger’s comments on this article are about right:
http://japanlost.blogspot.com/2009/06/weird-japan-to-elimate-cash-to-fight.html

Vitor July 5, 2009 at 3:00 pm

It seems like that not even fiat cash is “flexible” enough for the wildest keynesian (bad) dreamds.

Misesian July 5, 2009 at 4:14 pm

@Robert David Merchant:

No offense, but all of your suggestions are not liberty and free market oriented solutions, they are more of the same socialist, and corporatist solutions that have led us to the problems we face today.

1) Nothing wrong with bringing back manufacturing jobs into this country. You want it, then repeal the minimum wage, reduce or remove all corporate taxes, repeal red-tape regulations that have made it impossible for business to succeed in this country. Do that and a few other things and we have our manufacturing jobs back. Using Force, through more regulations and taxes for these businesses to stay here have only succeeded in making business to move abroad in the first place.

2)”People should pay taxes.”……What part of taxing to do you equate with job growth? How about removing all forms of taxes. The idea of taxes is to reduce the amount of anything…be it purchasing cigarettes or someone’s wage. Taxes are not good period.

3) Nothing inherently wrong with the business of investment banking, selling stocks, bonds and derivatives all function to lower or spread risk. What is wrong is the interference of central banks in manipulating interest rates and thus reducing risks which these institutions acting as rational agents take on riskier behavior. Get rid of the Fed, and fractional reserve banking, and the market will take care of itself.

4) Stop selling T-bonds to China et al? How about stop printing up T-bonds altogether to pay for programs we can’t afford. Why not just stop borrowing? Why not reduce spending here at home? The lenders are not at fault for our incessant spending WE are. That would be like accusing the credit card companies for my own reckless spending.

5) So we should steal another nations resources so Obama can spend it on programs here at home. This sounds like neocon foreign policy.

6) Forget balance budget, how about reduce spending, ie cut the budget.

7) The depreciation of the currency is due to the manipulation of it by central planers. Let the market decide what the purchasing power of currency should be. Given of course if Americans are free to chose what currency/or precious metal they wish to use as a medium of exchange.

8) I agree…See number 6 cut spending.

9) Get rid of the FED, cut spending which includes the military…and you don’t have to worry about lobby group, since you cut any of the funding that these leeches try to fight over.

10) I don’t understand this last one.

RWW July 5, 2009 at 5:51 pm

I’m hoping RDM is being satirical. All of his ideas are just extensions of the failed policies of the past. But of course, to say “failed policies” is to be redundant.

Kenny July 5, 2009 at 6:28 pm

Let me fix that list for you:

1. No innocent individuals or groups should be victim of any form of coercion by any other force, be it government or otherwise. All actions shall be voluntary in nature.

Economy fixed, among other things.

Emil Suric July 5, 2009 at 9:50 pm

Can negative interest rates even exist? How would that be represented on the capital market? Does that mean there’s absolutely no desire for current goods at all? To think, some Austrians say we should give up on capital theory.

Emil Suric July 5, 2009 at 9:59 pm

Or would it be exchanging current goods for past goods? Mankiew style negative interest rates are very confusing.

Ball July 5, 2009 at 11:24 pm

Well, boys, I reckon this is it – nuclear combat toe to toe with the Yen. Now look, boys, I ain’t much of a hand at makin’ speeches, but I got a pretty fair idea that something doggone important is goin’ on back there. And I got a fair idea the kinda personal emotions that some of you fellas may be thinkin’. Heck, I reckon you wouldn’t even be human bein’s if you didn’t have some pretty strong personal feelin’s about deflation. I want you to remember one thing, the folks back home is a-countin’ on you and by golly, we ain’t about to let ‘em down. I tell you something else, if this thing turns out to be half as important as I figure it just might be, I’d say that you’re all in line for some important promotions and personal citations when this thing’s over with. That goes for ever’ last one of you regardless of your race, color or your creed. Now let’s get this thing on the hump – we got some printin’ to do.

-Japanese economist

Ball July 5, 2009 at 11:29 pm

Mandrake, do you recall what Clemenceau once said about interest rates?

No, I don’t think I do, sir, no.

He said the economy was too important to be left to the market. When he said that, 50 years ago, he might have been right. But today, money is too important to be left to savers. They have neither the time, the training, nor the inclination for strategic thought. I can no longer sit back and allow Austrian infiltration, Austrian indoctrination, Austrian subversion and the international Austrian conspiracy to sap and impurify all of our precious bodily fluids.

Ball July 5, 2009 at 11:35 pm

Doctor, you mentioned the ratio of ten bonds to each yen. Now, wouldn’t that necessitate the abandonment of the so-called supply and demand relationship, I mean, as far as Japan were concerned?

Regrettably, yes. But it is, you know, a sacrifice required for the future of the human race. I hasten to add that since each earner will be required to do prodigious… service along these lines, the women will have to be selected for their spend-thrift characteristics which will have to be of a highly stimulating nature.

I must confess, you have an astonishingly good idea there, Doctor.

Ball July 5, 2009 at 11:37 pm

(OK, last one :)

You mean people could actually stay down there for a hundred basis points?

It would not be difficult, Mein Führer. Nuclear printers could – heh, I’m sorry, Mr. President – nuclear printers could provide credit almost indefinitely.

End the Fed July 6, 2009 at 3:27 pm

Since when is getting more for your money a “bad” thing? A “deflationary spiral” means people would only consume what they need and invest the rest in future production capability (rather than, say, just spending it on ANYTHING before it becomes worthless); since when is that “bad”? So people only buy what they actually need.

BioTube July 6, 2009 at 8:29 pm

Because then nobody ever spends and nobody ever gets paid and so everybody saves more and so on. It’s the perfect explanation for why the computer never caught on, despite its clear potential: the deflationary pressure were just too much; pity too – we could’ve had them down to two tons if it weren’t for deflation.

Tim July 6, 2009 at 9:11 pm

@Ball. That’s a good one.

The classic film should be redubbed along modern lines as:

Dr. Krugman, Or: How I Stopped Worrying and Love the Fiat

End the Fed July 7, 2009 at 10:19 am

“Because then nobody ever spends and nobody ever gets paid and so everybody saves more and so on.”

Well if everybody keeps saving everything, they don’t need to be “paid”, because they already have everything they want.

“It’s the perfect explanation for why the computer never caught on, despite its clear potential: the deflationary pressure were just too much; pity too – we could’ve had them down to two tons if it weren’t for deflation.”

Really, who would buy a computer when you know it will be worthless in a year? It’s not like people would buy it for its actual usefulness during that year. Computer makers should stop making better computers so they can raise prices and create higher paying jobs and boost the economy.

End the Fed July 7, 2009 at 10:28 am

“He said the economy was too important to be left to the market.”

The government is too important to be left to politicians.

Shenpen July 7, 2009 at 1:47 pm

” we fought for it with no one’s help”

WTF? Did you mean that seriously? UK? Poland? The others?

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