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Shirakawa: The Last Shogun of Hard Money

Published by Anonymous (not verified) on Sat, 16/10/2021 - 4:15pm in

Published in Nikkei Asia 11/10/2021

“What will unfold might be inflation, a financial bubble and subsequent financial crisis, social discontent due to widening inequalities in wealth, a continuous decline in the growth rate or some combination of these factors… There is pressing need for change. I believe everything starts with recognizing clearly where we are and where we are destined to go unless we change course.”

This is the doom-laden prophecy with which former Bank of Japan Governor Masaaki Shirakawa ends his newly published 530-page memoir Tumultuous Times, Central Banking in an Era of Crisis.

Although his criticisms of the super-low interest rate and quantitative easing policies deployed by central banks are diplomatically expressed and never personal, it is clear that he thinks we are all going to hell in a handbasket.

tumultuous times

Not only is unconventional monetary policy failing to cure the developed world’s ills, in his view it is actively making them worse. Using the concept of hysteresis (persistence of a state), he suggests that unnaturally low interest rates prolong themselves as demand is sucked from the future and  companies and projects proliferate that would be unviable at higher rates.

To understand where Shirakawa is coming from, it is necessary to understand Japan’s recent economic history. Just as American policymakers today are mindful of the lessons of the Great Depression and their German peers are guided by folk memories of hyperinflation in the Weimar Republic, so Japanese financial officials are forever scarred by the experience of the disastrous bubble economy of the late 1980s.

The lesson learnt: You don’t need hyperinflation or mass unemployment to destroy a nation’s economic well-being. A large enough bubble will do the job just as effectively. And the Japanese bubble was one for the ages, comprehending real estate of all kinds, stocks, artworks, golf-club memberships, ornamental carp, anything that could be traded.

When it burst, the price of commercial real estate in Osaka, Japan’s second city, fell by 90%. The Nikkei Stock Average embarked on a 20-year bear market and has yet to recover its highs. Compared to this, other modern bubbles were as the popping of children’s balloons to the crash of the Hindenburg airship.


Shirakawa joined the BoJ in 1973 after studying economics at the University of Tokyo. The bank sent him  to the University of Chicago, where he was taught by Nobel Prize-winner Robert Lucas and audited lectures by another Nobelist, Milton Friedman. Much later, Friedman was to criticize the Bank of Japan’s passivity in the face of deflation.

When the bubble madness was at its height, Shirakawa was a diligent, promising staffer in his late 30s. In his memoir, he attempts to deflect the blame from the institution where he spent most of his career. Indeed, as he points out, everyone bought in to the bubble logic — politicians, businessmen, intellectuals, the media, even foreign scholars and journalists who wrote best-selling books about how Japan was destined to unseat the U.S. as the world’s premier power.

Yet none of the above were charged with supervising Japan’s money supply and credit growth. That was the role of the BoJ, and it comprehensively failed in its mission.


The ensuing loss of faith in the authorities, including politicians and elite Ministry of Finance bureaucrats, was a bitter pill to swallow. The determination not to make the same mistake again became ingrained.

When official land prices finally bottomed out in 2006, the Bank of Japan stopped its quantitative easing program and raised interest rates, while the Financial Services Agency demanded more stringent lending standards. The “mini-bubble” that they were determined to stamp out consisted of a rise of 8% for residential plots in Tokyo, but of just 0.1% for the country as a whole. In many regions prices were still falling. The financial bureaucrats were jumping at shadows.

Shirakawa took over as BoJ Governor in early 2008 and experienced the global financial crisis of 2007-2009 and Japan’s triple disaster of earthquake, tsunami and nuclear meltdown in 2011. Whenever anything bad happened, whether overseas or domestically, the yen would strengthen, moving from 103 to the dollar to 76 in the course of his term.

A strong currency is appropriate if economic conditions are buoyant, but after the earthquake the Japanese economy was on its knees. Unsurprisingly, monetary policy became highly politicized, with businessmen, politicians and private sector economists increasingly vocal in their demands for a more reflationary policy.

Shirakawa held firm, maintaining that there was nothing he could do — the excessively strong yen was caused by overseas factors. He was and remains a strong advocate of fiscal tightening via tax hikes. Nowhere in his memoir does he address the point that Japan’s government debt is merely the other side of the balance sheet to the Mount Fuji of savings built up by Japanese companies and households.

Finally, the inevitable happened. Both public and politicians tired of hair shirt economics. Former Prime Minister Shinzo Abe reappeared on the scene with a reflationary program that was to become known as Abenomics and give him a second, record-breaking stint in power.

 the yen too high, the Nikkei Index too low The bad old days before Abe: the yen too high, the Nikkei Index too low

Almost from the moment that Abe won the leadership of the Liberal Democratic Party, the yen fell sharply on the foreign exchange markets, as investors began to factor in a major change in policy settings. Shirakawa argues, very unconvincingly, that the rapid retreat of the yen to more than 100 to the dollar was caused by developments in the Eurozone crisis, not the imminent end of his own hardline policies.

Never say never, but so far the yen has not returned to anywhere near those nosebleed levels of the Shirakawa years.

Something similar happened in the stock market. In September 2012, just before Abe’s comeback, the Nikkei average was languishing at 8,870, the same level as in 1983. In a matter of weeks, it had embarked on a bull market that is still extant today, even after a trebling in price. Importantly, the rise has not been caused by bubble-type speculative excess, but by “fundamentals” — a remarkable improvement in Japanese corporate profits.

A man of principle, Shirakawa took the unusual step of resigning a few months before the end of his term, recognizing that he was not the right person to implement Abenomics after Abe’s landslide general election victory gave him a popular mandate.

Shirakawa published the Japanese version of his book in 2018, but has revised it and added new sections for the English version, which has comments on the COVID-19 era. He writes modestly and perceptively about the limited nature of our economic and other knowledge and makes some strong points.

Crucially, “unconventional monetary policy” has not succeeded — in Japan or anywhere else — in achieving its primary goal, which is to raise the rate of inflation. Is that because it has not been combined with expansionary fiscal policy, or is the structural force of shrinking demographics the key factor in staunching inflationary pressures, as Shirakawa believes? We will find out over next few years.

According to Shirakawa, the success or failure of monetary policy can only be judged in the long-term, by which he means in decades. On that basis, it is still too early to judge his record, but the same should go for his successor, Haruhiko Kuroda.

Shirakawa makes his point Shirakawa makes his point

Japan appears to be in a much better place now than it was in the pre-Abe years, but Shirakawa’s views and analysis are of great interest, nonetheless. In fact, they probably have more applicability in the U.S. and the U.K. — where asset bubbles, inequality and inflation are clearly visible and could well have dire economic and social consequences.

If they do, Shirakawa will have been at least partially vindicated.


Roger Waters: Hey, Judge, Leave Donziger Alone

Published by Anonymous (not verified) on Fri, 08/10/2021 - 10:51pm in


articles, Ecuador

Roger Waters of Pink Floyd fame attended the trial and persecution of Steven Donziger, the human rights lawyer who defended the Cofan indigenous people of the Amazon against Chevron Oil. Waters actually sat through several days of the trials, horrified at the... READ MORE

3rd Edition: Super-Imperialism

Published by Anonymous (not verified) on Fri, 08/10/2021 - 3:38pm in



The updated and expanded 3rd edition of Super Imperialism: The Economic Strategy of American Empire is now available.

This highly respected study of U.S. financial diplomacy explores the faults built into the core of the World Bank and the IMF at their inception. Forensic detail reveals how the world’s core economic functions were sculpted to preserve US financial hegemony. Difficult to detect at the time, these problems have since become explicit as the failure of the international economic order has become apparent; the IMF and World Bank were set up to give aid to developing countries, but instead many of the world’s poorest countries have been plunged into insurmountable debt crises.

The book became famous for detailing how the removal of the gold standard left the world’s central banks with only one alternative vehicle: to hold their international reserves in U.S. Treasury securities.

The result was a self-financing circular flow of U.S. military spending and the investment takeover of foreign economies. The larger America’s balance-of-payments deficit grew, the more dollars ended up in the hands of central banks and sovereign wealth funds. Machiavelli could not have planned it better. By participating in this circular flow, nations in effect financed their own economic and military encirclement.

The 3rd edition includes the following additions:

  • Monetary Imperialism in the Twenty-first Century and The Ending of Super Imperialism
  • Britain’s 1945 Parliamentary debate on the British Loan and fracturing of the British Empire
  • America’s promotion of offshore banking centers to attract hot money as a partial solution to its Cold War induced balance-of-payments deficit.

Hudson’s critique of the destructive course of the international economic system provides important insights into the real motivations at the heart of these institutions – and the increasing tide of opposition that they face around the world.

Ann Pettifor:

In this book Michael Hudson illuminates one of the most powerful forces in global economics – one which is hidden, and widely misunderstood. It is the use by the United States of a “money-pump” – an economic contraption which liberally pumps out money to finance extravagant US consumption and spending. This “money-pump” works at almost no cost to Americans, and at considerable cost to those who pour dollars into the “pump” – the rest of us. That is why this book is vital reading.

This magisterial account of US imperialism is extraordinary in its range and immediacy. It was clearly written at a time when the events were still fresh in the memory of the author, and so has an authenticity missing in later accounts of the US’s decisive changes to the global economy.”

Herman Kahn (1972):

You’ve shown how the United States has run rings around Britain and every other empire-building nation in history. We’ve pulled off the greatest rip-off ever achieved.

Support my work by becoming a supporter on Patreon.

Buy it now: Super Imperialism: The Economic Strategy of American Empire.

The post 3rd Edition: Super-Imperialism first appeared on Michael Hudson.

Ali Alexander subpoenaed by CongressExposed as instigator behind illegal Jan 6 march on Capitol

Published by Anonymous (not verified) on Fri, 08/10/2021 - 2:01pm in

Today, Congress finally subpoenaed Ali Alexander, whom our investigation exposed as the instigator of the illegal January 6 march on the capitol. We had, on January 8 also disclosed that the Georgia Republican Party had officially sponsored Alexander despite his threats of violence if Trump were not declared re-elected. The Select Committee to Investigative the January 6th Attack filed... READ MORE

Chevron: A Smoking Gun and a Cover Up

Published by Anonymous (not verified) on Thu, 07/10/2021 - 9:38am in

In 2011, an Ecuadorian court ordered Chevron to pay $9.5 billion for the poisoning of indigenous lands. The courts found that Chevron’s Texaco operation had illegally dumped 16 billion gallons of deadly oil waste.

The smoking gun? This confidential document, in which the Chairman of Chevron Oil’s Texaco division personally orders that incriminating evidence of oil sludge dumping in Ecuador be “removed…and destroyed.” ... READ MORE

Steven Donziger sentenced to six months in prison

Published by Anonymous (not verified) on Sat, 02/10/2021 - 6:04am in

[Oct 1, 2021: New York] Human rights lawyer Steven Donziger was sentenced to six months in prison today for contempt of court. For the first time in US history in such a case, he was prosecuted not by the US Justice Department, but by a private attorney who worked for Chevron. He received the maximum sentence for... READ MORE

Steven Donziger: Why I SmilePalast interviews human rights lawyer ahead of sentencing

Published by Anonymous (not verified) on Fri, 01/10/2021 - 10:31pm in

On the eve of his sentencing, human rights lawyer, Steven Donziger, who fought Chevron oil and its destruction of the indigenous lands of the Amazon spoke to me about why, despite being destroyed by the oil company, he is... READ MORE

Fact Injection: Donziger v. Chevron

Published by Anonymous (not verified) on Wed, 29/09/2021 - 10:15pm in

This is the first time in history that a private corporation has criminally prosecuted a U.S. citizen. In an unprecedented move, a judge asked Chevron's lawyers to prosecute Donziger for criminal contempt — after the Department of Justice had refused to do so. No jury would convict Donziger, so the judge refused him a jury trial and found him guilty. On October 1 this judge is going to sentence Donziger. He could get six months in jail—on top of the two years he's already served under house arrest—so I want you to... READ MORE

The Cheese Smelled Funny So We Threw It in the JungleVultures' Picnic: Chapter 5

Published by Anonymous (not verified) on Tue, 28/09/2021 - 7:31am in

I ended up out here in the rain forest half by accident. I had some confidential papers from the World Bank I intended to give to Ecuador’s President. But, going through the documents, it was clear that there was no way to understand Ecuador, which had just rejoined OPEC, without first following the oil. And following the oil meant going into the oil fields in the jungle and grilling the Natives about their claims of illnesses and deaths ... READ MORE

Few Show Up For “Justice” at Rally in Support of Jan 6 Rioters

Published by Anonymous (not verified) on Sun, 19/09/2021 - 5:43am in



[Sept 18, 2021: Washington, D.C.] It was a spectacular fizzle.  While Washington’s Capitol Police had prepared for a massive, potentially violent gathering of supporters of the imprisoned January 6 rioters, only a few dozen showed up—outnumbered five to one by... READ MORE