Ideal Taxes Association

Raymond Richman       -       Jesse Richman       -       Howard Richman

 Richmans' Trade and Taxes Blog



Bank of Japan steps up its mercantilist attack upon the U.S. economic future.
Howard Richman, 10/31/2014

The biggest financial news this morning is that the Bank of Japan announced last night that it was going to boost its money creation -- using the money to buy U.S. stocks. Here's a selection from an article on Zero Hedge, my favorite economics blog: 

In retrospect, the BOJ's [Bank of Japan's] announcement [that it would be creating money and using it to buy Japanese government long term bonds] should have been anticipated. Recall that yesterday, the biggest non-story was the regurgitated headline that the Japanese Pension fund would boost its holdings of domestic and foreign stock from 12% to 25%, while slashing its Japan bond holdings from 60% to 35%, something that had been leaked previously. The full changes:

  • Domestic stocks raised to 25% from 12%
  • Japan bonds cut to 35% from 60%
  • Overseas shares 25% from 12%
  • Foreign debt 15% from 11%

And here's an article about the same announcement being the cause of rising U.S. stock prices on the Yahoo Finance blog:

http://finance.yahoo.com/news/stocks-charges-toward-new-highs-after-bank-of-japan-s--qe-115342351.html

Explanation:

The Japanese government wants to buy American dollars and use the money to buy American stocks. This action boosts of the dollar versus the yen, giving Japanese companies more profits in their competition with American companies. Japanese companies, thus, make more money which they can invest in developing new or improved products.

The Bank of Japan doesn't want the U.S. stocks to appear on its balance sheet, so it buys Japanese bonds from Japanese pension funds and tells the pension funds to buy the U.S. stocks.

The effect upon the U.S. will be exactly in the opposite from the effect upon Japan. U.S. companies that compete with Japanese products will make lower profits and will have less available to invest. The long-term growth of the U.S. economy will suffer as a result.

But U.S. stock holders will benefit in the short-run. They will be able to sell their stock at an inflated price and consume the proceeds. They'll live high until the stock market bubble pops.

I don't think that Janet Yellen, at the Federal Reserve, is objecting to this action. I am not even sure that she is aware that the Bank of Japan is beggaring the United States. I guess it is only economic warfare if two countries fight. The leadership of the United States doesn't fight back.

Your Name:

Post a Comment:




  • Richmans' Blog    RSS
  • Our New Book - Balanced Trade
  • Buy Trading Away Our Future
  • Read Trading Away Our Future
  • Richmans' Commentaries
  • ITA Working Papers
  • ITA on Facebook
  • Contact Us

    Archive
    Sep 2017
    Aug 2017
    Jul 2017
    Jun 2017
    May 2017
    Apr 2017
    Mar 2017
    Feb 2017
    Jan 2017
    Dec 2016
    Nov 2016
    Oct 2016
    Sep 2016
    Aug 2016
    Jul 2016
    Jun 2016
    May 2016
    Apr 2016
    Mar 2016
    Feb 2016
    Jan 2016
    Dec 2015
    Nov 2015
    Oct 2015
    Sep 2015
    Aug 2015
    Jul 2015
    Jun 2015
    May 2015
    Apr 2015
    Mar 2015
    Feb 2015
    Jan 2015
    Dec 2014
    Nov 2014
    Oct 2014

    September 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    February 2014
    January 2014
    December 2013
    November 2013
    October 2013
    September 2013
    August 2013
    July 2013
    June 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    December 2012
    November 2012
    October 2012
    September 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    January 2012
    December 2011
    November 2011
    October 2011
    September 2011
    August 2011
    July 2011
    June 2011
    May 2011
    April 2011
    March 2011
    February 2011
    January 2011
    December 2010
    November 2010
    October 2010
    September 2010
    August 2010
    July 2010
    June 2010
    May 2010
    April 2010
    March 2010
    February 2010
    January 2010

    Categories:
    Book Reviews
    Capital Gains Taxation
    Corporate Income Tax
    Consumption Taxes
    Economy - Long Term
    Economy - Short Term
    Environmental Regulation
    Real Estate Taxation
    Trade

    Miscellaneous

    Outside Links:

  • American Economic Alert
  • American Jobs Alliance
  • Angry Bear Blog
  • Economy in Crisis
  • Econbrowser
  • Emmanuel Goldstein's Blog
  • Levy Economics Institute
  • McKeever Institute
  • Michael Pettis Blog
  • Naked Capitalism
  • Natural Born Conservative
  • Science & Public Policy Inst.
  • TradeReform.org
  • Votersway Blog
  • Watt's Up With That


    Wikipedia:

  • [An] extensive argument for balanced trade, and a program to achieve balanced trade is presented in Trading Away Our Future, by Raymond Richman, Howard Richman and Jesse Richman. “A minimum standard for ensuring that trade does benefit all is that trade should be relatively in balance.” [Balanced Trade entry]

    Journal of Economic Literature:

  • [Trading Away Our Future] Examines the costs and benefits of U.S. trade and tax policies. Discusses why trade deficits matter; root of the trade deficit; the “ostrich” and “eagles” attitudes; how to balance trade; taxation of capital gains; the real estate tax; the corporate income tax; solving the low savings problem; how to protect one’s assets; and a program for a strong America....

    Atlantic Economic Journal:

  • In Trading Away Our Future   Richman ... advocates the immediate adoption of a set of public policy proposal designed to reduce the trade deficit and increase domestic savings.... the set of public policy proposals is a wake-up call... [February 17, 2009 review by T.H. Cate]