Monday, May 13, 2013

Washington & Wall Street: Ben Bernanke's Global Inflation Strategy

The Bank of Japan has embarked on a deliberate act of economic warfare, aimed in part against China and the other nations of Asia. The attack is in the form of expansion of Japan’s money supply and the related decline in the value of the yen, this to boost Japan’s economy. The Japanese are desperate to boost economic activity, albeit by imitating the Fed’s own failed pro-inflation policies.

The BOJ creates new yen and then sells its currency and buys dollars. The Japanese are one of the biggest buyers of US agency securities, for example, effective duplicating the Fed’s own “quantitative easing” or QE to keep mortgage rates low. But what neither officials at the Fed or BOJ understand is that their actions are futile in terms of creating real jobs and growth, and dangerous regards inflation. Two percent inflation over two decades destroys the purchasing power of working people, but nobody at the Fed cares.

“The Bank of Japan is taking down the entire world,” worries lawyer and author James Rickards, but allows that the Japanese are only following the bad example of the Federal Open Market Committee. “Bernanke has advanced the idea that if we all hold hands and devalue together, it is OK as far as inflation is concerned. If we all ease at the same time, then it is not a currency war.”