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Gold/Mining/Energy : Gold Price Monitor
GDXJ 101.44+3.5%4:00 PM EST
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To: Abner Hosmer who wrote (66099)3/19/2001 12:00:20 AM
From: ahhaha  Read Replies (2) of 116756
 
Not me. I said they should create currency. Lowering interest rates won't have any effect in a supply side economy unless nominal demand is boosted. Currency component of M2 is shrinking and has been for years. Create currency and rates rise naturally which would cause the yen to firm against the dollar. Currency can't be easily spent abroad so it goes to stimulating domestic demand.

The BOJ is dominated by school of demand management thinking which asserts that interest rates are always and strictly inversely proportional to money supply. Not in a supply oriented cash economy, only in a demand oriented debt economy. Japan needs to raise rates. They can't do that directly and they don't need to do it. An increase in currency would do it for them.

And yes, the inverse is implied. The FED needs to shrink our roaring money supply growth by staying out of money market and allowing rates to freely float. They wouldn't rise much and they may fall. By pursuing the current policy they guarantee disaster. What is current policy? Targeting interest rates at some irrelevant level while Fisher and his NY Fed manipulators pump in plenty with coupon passes and with a fattened RP free float which leverages M2 off the permanent injections.
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