Japan’s economy has been stagnant for two decades. In 2012, Shinzo Abe was elected Prime Minister on his promise of stimulating the economy via a scheme that economists labeled “Abenomics.” Basically, he promised fiscal stimulus, monetary easing and structural reforms.
He implemented all three, but Japan’s economy remains in the doldrums. Now the IMF is urging Abe to double down.
The goal is simple: 2% inflation. According to those advocating Abenomics, 2% inflation will cause savers to spend. Now, with deflation or minimal inflation, savers benefit as the purchasing power of their savings grows. Abe wants to reverse that, to change the Japanese people’s proclivity to save.
Actually, the IMF wants Japan to do more than double down to get inflation cranking. It wants Japan to adopt an “incomes policy” that would require employers (including the government) to raise wages 3% a year. That is taking Keynesian economics to the max.
An incomes policy would be almost as bold as Martin Wolf’s recommendation a few months ago that the world’s central banks deposit money in the accounts of all adults in their countries.
The important takeaway here is that Keynesianism dominates economic thinking worldwide. Today, higher rates of inflation is the Keynesian solution to economic woes. Only in Austrian economic circles will you hear the solution being to stop printing money, suffer a recession (or depression), let the unviable businesses fail, let the markets reallocate the failed businesses’ assets and get on with the recovery.
The Austrian solution is not going to be tried. Inflation is the wave of the future and buying gold and silver is the best way for the average person to protect against the economic lunacy that permeates today’s financial and economic circles.