In a statement that could not have been more blunt, last week the IMF told Japan that it needs to print more money to ensure that its economy will not slip into recession. Specifically, the IMF wants the Bank of Japan to push inflation to 2 percent. Japan’s inflation rate is near zero.
The IMF recommendation ignores the fact that economies can suffer inflation and recession at the same time, as did the US economy in the 1970s. However, Keynesian economic theories dominate present thinking as to how economies should be “managed.”
Japan is now in its third year of what has been dubbed “Abenomics,” named after Prime Minister Shinzo Abe, who campaigned in 2012 on a platform of monetary stimulation to rejuvenate Japan’s economy, which has been stagnant for decades.
As can be seen in the graph, the BoJ’s balance sheet has ballooned with its bond purchases since Abe’s polices were instituted. Presently, the BoJ is buying at the rate of Y80 trillion ($659 billion) a year.
What is to be taken from this is that Keynesianism dominates economic thinking worldwide and massive money creation is not to be feared but embraced. In time (no way of knowing when), price inflation will kick in, and gold and silver owners will see the fruits of their patience.