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Video – Political Economy thought and praxis post pandemic

Published by Anonymous (not verified) on Wed, 27/01/2021 - 4:59pm in


Inflation, Japan, Music

It’s Wednesday and I have been tied up most of the day on things that keep me from writing. But I offer some comments on today’s inflation data from the Australian Bureau of Statistics which will help you understand that we have to be very careful in analysing that data because quite often CPI increases are driven by government policy which allows administered prices to rise. Short conclusion: a rising inflation rate does not signal a growing economy necessarily. I also provide details about my current lecture series at the University of Helsinko, which the broader public are invited to participate in. And then some fusion.

Today’s Australian Inflation results

The Australian Bureau of Statistics released the latest – Consumer Price Index – data today (January 27, 2020) for the December-quarter 2020.

I won’t provide a detailed analysis of it here but the release highlights something that many people seem to ignore.

I did several press interviews today about the release and the journalists were all interested in whether the 0.9 per cent rise for the quarter signalled that the economy was running out of fiscal space.

I noted the following:

1. Alcohol and tobacco was the major contributor to the increase in the CPI. Why? It reflected:

… the annual excise tax increase of 12.5% and the bi-annual excise tax increase … both applied on 1 September 2020.

2. The Health group rose 1.3 per cent. Why? “due to increases in private health insurance premiums on 1 October 2020″ – these are administrative increases allowed by the government to give rents to the private medical providers.

3. Education group rose 1.2 per cent. Why? Because the government terminated the ” free before and after school care from the ‘Early Childhood Education and Care Relief Package’.”

4. The Transport group rose 0.9 per cent. Why? In part, because of “the cessation of discounts offered on Sydney off-peak fares” as part of the pandemic relief.

5. The Furnishings, household equipment and services group rose 3.4 per cent. Why? Mostly because “out-of-pocket expenses for child care fees returned to pre-COVID levels” after the government had provided free child care as part of its rescue package for that sector.

6. Within the Housing group, which fell by 0.6 per cent, Electricity fell by 7.5 per cent. Why? Because electricity prices fell significantly as a result of State government initiatives to provide a free power (a credit segment) as part of the relief.

The point is that all these shifts are administrative type influences. Decisions by government to extend relief or withdraw fiscal relief and in the case of health care to guarantee rents to the snivelling private health care provides.

They are nothing to do with spending intensity and relative resource availability.

In many cases, CPI movements are driven by these types of influences and bear no relation to the state of the fiscal situation in the nation.

When we observe rising inflation like this, we have to be careful not to fall into the mainstream trap that it is because the fiscal stimulus was too large.

In fact, I told the journalists that there is significant scope for fiscal expansion at present and the government would be acting responsibly to do that.

How do I come up with that?

The broad labour underutilisation rate is currently 15.1 per cent (meaning that that percentage of available workers is being wasted in one way or another – unemployment or underemployment) and the participation rate is below recent peaks (meaning that there has been a rise in hidden unemployment as workers have given up job search due to the lack of employment opportunities).

When we see that level of mass resource wastage then we know at least one other thing – the fiscal deficit is too low.

Public Lecture – Political Economy thought and praxis post pandemic

Last night, I presented this lecture, which is an annual event for me when I visit Helsinki each year as part of my professorial duties at the University of Helsinki.

The lecture was streamed on YouTube this year given the travel restrictions have prevented me from going to Finland.

This lecture opens my annual 6 lecture series, which are part of the post-graduate political economy program.

While this lecture aims to be accessible to the general public, the other lectures are more academic in nature and have technical aspects that may or may not appeal to a general audience.

The University of Helsinki have indicated they are happy for the general public to attend the additional five lectures should they wish.

Unlike, the public lecture last night, the remaining lectures will be via Zoom.

The time table is:

  • Public Lecture – January 26, 2021 – Last evening – see video below.
  • Lecture 2 – January 29, 2021
  • Lecture 3 – February 2, 2021
  • Lecture 4 – February 4, 2021
  • Lecture 5 – February 9, 2021
  • Lecture 6 – February 11, 2021

But be clear these are formal teaching lectures not aimed at the general public. MMTed will be launching lectures soon that covers similar material in a less academic way.

The Zoom link will be at: https://helsinki.zoom.us/j/61941922246?pwd=YXpPM0xYQWFFYUNsMjhtNGZMOUg5dz09
Meeting ID: 619 4192 2246
Passcode: 661432

The lectures start 18:15 Sydney/Melbourne time except for Friday, January 29, when it will start at 18:00.

This is 09:15 Helsinki time.

Music – Back to 1989 for this one – almost contemporary

This is what I have been listening to while working this morning.

I quite like – Marcus Miller – when he plays solo bass lines.

I also, obviously, liked – Miles Davis (his playing not his non-music behaviour) – and I have always been partial to – Kenny Garrett on sax and – Omar Hakim – on drums.

So it was also obvious that I would like this album – Amandla (Warner Brothers )- when it came out in 1989. It was one of the last albums Miles Davis released and it was produced by Marcus Miller who played bass, guitar and keyboards (therefore talented).

He wrote this song – Amandla – the title track from the album. The name Amandla means power in the Zulu and Zhosa languages.

This was the third album that Miles Davis and Marcus Miller recorded together from 1986, then 1987 and then this one in 1989. All great albums I should say.

It is fusion of the good variety although it was somewhat canned at the time by critics who claimed Miles Davis had had his day. The critics had hated his 1969 release Bitches Brew, which marked the start of his fusion days (to make a living given the decline of pure jazz opportunities) but hated this album even more because it when he teamed up with Marcus Miller, out came the programmed synths, samplers and drum loop/machines, which sent the ‘purists’ into conniptions.

The sound was great though so the purists missed the point.

He died two years later. This was one of his last albums and not his best but still better than most.

And if you listen hard enough you will sense the Zouk influence from the Caribbean. I might just drag some Zouk out for next week’s track. That should be entertaining.

That is enough for today!

(c) Copyright 2021 William Mitchell. All Rights Reserved.

China Tech Ban Mirrors 1980s Attempts To Destroy Japanese Competition

Published by Anonymous (not verified) on Sat, 16/01/2021 - 7:25am in

With just days left in office, the Trump administration has blacklisted an additional nine Chinese companies, adding them to a long list of firms on the U.S. military blacklist and escalating the trade war on Beijing as the U.S. attempts to suppress China’s economic rise. 

The Department of Defense claimed that those on its list are secretly owned or controlled by the Chinese military and that it was “determined to highlight and counter” threats that “appear to be civilian entities” but are not. Those companies are now likely partially blocked from the U.S. market and from doing business with American companies. 

Chief on the list is electronics giant Xiaomi, whose stocks plunged by 11% this morning and have not recovered. While still relatively unknown in the U.S., Xiaomi is a global giant, manufacturing televisions, smartwatches, tablets, and all manner of home appliances. They are surely best known, however, as makers of smartphones. In quarter three of last year, Xiaomi stormed past Apple to become the planet’s third-largest smartphone maker, behind only Samsung and fellow-sanctioned Chinese giant Huawei. Xiaomi sold 46.5 million units, a 42% increase on Q3 last year — an impressive jump, especially considering the economic slowdown caused by the coronavirus pandemic. Airplane manufacturer Comac, oil giant CNOOOC and Chinese chipmaker SMIC were also added to the list.

Quickly developing a loyal base of customers, Xiaomi is increasingly seen across the planet as a major competitor to Apple, selling similarly specced units for a fraction of the price of an iPhone. By contrast, both Apple’s smartphone sales and market share have been falling dramatically, suggesting that, unlikely as it seems, Apple could go the way of Nokia or Motorola before them. 


The government’s move is the latest episode in the ever-intensifying trade war against Beijing. The Trump administration has previously sanctioned other Chinese tech giants like smartphone manufacturer and 5G provider Huawei and video-sharing social media app TikTok, claiming them to be dangerous appendages of the Red Army. In 2020, the president threatened to shut down TikTok, unless it was sold to an American corporation. Other pro-U.S. countries such as India went further, instituting an outright ban on the popular platform. 


“Pivot to Asia”

It is unclear who, apart from American tech firms, have been the beneficiary of this trade war. A recently-published study found that Trump’s decisions on China have cost close to a quarter of a million American jobs already and will likely lead to the loss of 145,000 more by 2025. 

The Trump administration has also built on President Obama’s military “Pivot to Asia,” attempting to encircle Russia and China with American military bases, and building alliances with Beijing’s neighbors in order to do so. U.S. warships and planes have been probing the Chinese coast for months, attempting to gain more knowledge about their defense systems. In July, the U.S.S. Rafael Peralta went within 41 nautical miles of the coastal megacity of Shanghai. Last month, the military also flew nuclear bombers over Chinese ships close to the province of Hainan Island. 


The China tech ban mirrors the moves in the 1980s to destroy the Japanese semiconductor industry, which had rapidly risen and overtaken its American competitor. If nothing was done, Japan would have easily overtaken Silicon Valley to become the world’s electronics and communications capital. The U.S. imposed a 100% tariff on virtually all Japanese electronics and forced Tokyo to sign a one-sided trade deal that reserved much of its domestic semiconductor sector for American companies and opened the country up for American agribusiness. In no small part due to U.S. actions, much of the high-tech sector collapsed, and Japan has suffered over 30 years of economic recession since. Xiaomi also makes semiconductors. 

China’s response to the news was to point the finger at the U.S. Zhao Lijian, a spokesman for the Ministry of Foreign Affairs, said that the United States has a long history of civilian-military tech partnerships and accused the Trump administration of double-standards and bullying. 

Lijian is not incorrect; virtually every big American tech firm has close links with the government or the military. In November, for instance, Microsoft, Google, Oracle, IBM, and Amazon Web Services all signed a 15-year deal to provide the CIA and 16 other intelligence agencies with cloud computing and other digital services. In their book titled, “The New Digital Age: Reshaping the Future of People, Nations and Business,” Eric Schmidt and fellow Google executive Jared Cohen wrote, “What Lockheed Martin was to the twentieth century…technology and cyber-security companies will be to the twenty-first,” suggesting that they saw big tech’s role as the tip of the American spear. 


During the presidential debates, Trump and Biden appeared to be trying to outcompete each other on their hawkishness towards China, each presenting the other as a puppet of Chinese Premier Xi Jinping. While Biden might not have opted for a ban on Chinese companies like Trump has, analysts suggest that he is unlikely to reverse this decision, nor to change the direction of American policy. Thus, the Xiaomi restrictions are unlikely to be the last shots fired in the growing trade war against Beijing.

Feature photo | A woman takes a photo with a phone that has a United States flag themed cover outside the United States Consulate in Chengdu in southwest China’s Sichuan province on, July 26, 2020. Ng Han Guan | AP

Alan MacLeod is a Staff Writer for MintPress News. After completing his PhD in 2017 he published two books: Bad News From Venezuela: Twenty Years of Fake News and Misreporting and Propaganda in the Information Age: Still Manufacturing Consent. He has also contributed to Fairness and Accuracy in ReportingThe GuardianSalonThe GrayzoneJacobin MagazineCommon Dreams the American Herald Tribune and The Canary.

The post China Tech Ban Mirrors 1980s Attempts To Destroy Japanese Competition appeared first on MintPress News.

BLM Activist Calls for Dictionary to Redefine Racism

Here’s something far more controversial after some of the posts I’ve put up recently. A few days ago, the writer and Youtuber Simon Webb put up on his channel, History Debunked, a piece about a worrying attempt by a young Black American woman, Kennedy Mitchum to change the definition of racism in the Merriam-Webster dictionary. Webb states that most people would say that racism means racial prejudice, or that there are more profound differences between racial groups than their skin colour and physical appearance. The Merriam-Webster dictionary currently defines racism as

  1. A belief that race is the primary determinant of human traits and capacities, and that racial differences produce an inherent superiority of a particular race.
  2. A doctrine or political programme based on racism and designed to execute its policies.
  3. Racial prejudice or discrimination.

This wasn’t good enough for Mitchum. Three days after the death of George Floyd, with riots breaking out across America, she emailed the publisher calling for the definition to be changed in accordance with Critical Race Theory. This holds that racism is due to the imbalance of power in society, and implemented by the dominant racial group. Instead of telling Mitchum where to stick her suggestion, as Webb himself would have done, the publishers responded to her, telling her that this issue needed to be addressed sooner rather than later and that a revision would be made. Peter Sokolofsky, one of the dictionary’s editors, stated that the second definition would be expanded to be even more explicit in its next edition, and would include systemic oppression as well as sample sentence, and would be formulated in consultation with academics in Black Studies.

Webb points out that if this is done, then it would redefine racism as something that only Whites do, and absolve people of colour of any responsibility for it on their part, or indeed see them as being racist at all, because Whites are the dominant race in Britain and America. This is, he claims, the attitude of many liberals and leftists, who believe that all White people are racist. It would also mean that Blacks, who hated Jews or Indians, would not be viewed as racist. He has personally seen such racism in the Caribbean street robbers of Hackney. They hated Orthodox Jews and used to go to Stamford Bridge to prey on the Jewish community there. He ends the video by stating that such a redefinition of racism would mean that all Whites in Britain and America are defined as racist but no other ethnic groups.

Changing the dictionary definition of racism – YouTube

There certainly is an attitude amongst some anti-racist activists that only White people can be racist and are never the victims. Way back in October 2019 Sargon of Akkad, the man who broke UKIP, put up a post commenting on a report in the Guardian about complaints about an EHRC investigation into racism at Britain’s universities by a group of Black and Asian academics and students. The group, which included Heidi Mirza, the visiting professor of race, faith and culture and Goldsmiths College, University of London, Fope Olaleye, the NUS’ Black students’ officer, Gargi Bhattacharyya, professor of sociology at the University of East London, and Zubaida Haque, the deputy director of the racial equality think tank, the Runnymede Trust, were outraged at the Commission because it dared to include anti-White, anti-English racism. This, they seemed to believe, detracted from the Commission’s true purpose, which was to combat White racism against Blacks and Asians.

Students of Colour Furious that Anti-White Prejudice is Considered to be Racism – YouTube

I’ve posted a number of pieces criticising the lack of attention and action against anti-White racism. At the moment the attitude that racism is something that only Whites are guilty of racism seems extremely prevalent. In fact, the situation regarding racial prejudice, abuse and violence is far more complex. About 20 years ago, before 9/11 and the subsequent massive rise in Islamophobia, Whites briefly formed the largest number of victims of racial abuse and violence. There are also tensions and conflict between different non-White minorities. In the 1980s or ’90s there was a riot in Birmingham, not between Blacks and Whites, but between Blacks and Asians. I’ve also heard that in one of the schools in Bristol in one of the very racially mixed areas, most of the playground fights were between different groups of Asians. Some people were aware that different ethnic groups also had their racial prejudices. Boy George mentioned it when he appeared on Max Headroom’s chat show on British TV in the 1980s, for which he was praised for his brave outspokenness by the world’s first computer generated video jockey.

There is, however, a real reluctance to tackle ethnic minority racism. A couple of years ago an Asian man told Diane Abbott that there should be more action on the racism members of ethnic minorities experienced at the hands of other non-Whites. Abbott told him she wasn’t going to do anything about it, because the Tories would use it to divide and rule. Like Kennedy Mitchum and the Critical Race Theorists, as well as the critics of the EHRC, she was solely focussed on tackling White racism.

That focus, in my opinion, explains why the Black comedian and anti-racist activist, Sophie Duker, felt she could get away with a joke about killing Whitey on Frankie Boyle’s podcast. Boyle had assembled a panel of mainly Black and Asian activists, to discuss the topic of how ethnic minorities were coming together to kill Whitey. Duker had made comments about racism being the product of an ideology of Whiteness, which was harming Blacks and Whites. She then said that they didn’t want to kill Whitey, before adding ‘we do really’. She was clearly joking, but her comment resulted in the corporation receiving 200 complaints. According to right-wing internet radio host and Youtuber, Alex Belfield, the Beeb is now being investigated by the Greater Manchester Police for what is described as a ‘hate incident’. His attitude is that while Duker’s comment was a joke, it should be unacceptable, just as making jokes about killing Blacks is unacceptable. See, for example, his piece ‘Reply BBC ‘Whitey’ Joker STAGGERING From Unapologetic Hate Lady Comedian’, which he put up on Youtube on the 8th January 2021. No, I’m not going to link to it. Even I have standards! I think one of the reasons she felt she could make the joke is because she and the other activists concentrate exclusively on White racism. Anti-White racism simply isn’t an issue with them. But anti-White racism, abuse and violence does occur, hence the angry complaints.

We really do need a study of anti-White racism and racism amongst ethnic minorities. Sir Alan Burns, a British colonial civil servant and former governor of the Gold Coast, now Ghana, discusses Black prejudice against Whites and other racial groups in his book, Colour Prejudice, published in 1948. Nigel Barley also discusses the blind spot Cameroonians had towards their own racism, as well as that of a Black American ethnologist in his The Innocent Anthropologist. The Black American was very racially aware. An idealist, he was inspired by notions of Black brotherhood and wished to live and be treated by the local people the same as one of them. He was shocked when they continued to regard him as they would White westerners, and failed to see how the Fulani traders rigged the local markets to exclude those from other tribes. As for the Camerounians generally, they commonly believed that only Whites were racist. Barley describes how they excused the massacre of French nuns in the Congo by the claim that the nuns were themselves racists. But they refused to recognise that their own hatred and contempt of the people he was studying, the Dowayo, was also racist.

Some Asian nations also have a reputation for racism. Back in the 1990s I found a book on Chinese xenophobia on sale in Waterstones in Bath. I’ve also read various books on Japan, which have also described how racist Japanese society is. I don’t know if it is still true, but one could only qualify as a Japanese citizen if both parents were Japanese. This meant that there was a sizable Korean community, who had lived in the country for generations, which had no civil rights under the law. In schools there was a strong suspicion of outsiders, so it has been claimed, which resulted in foreign students being segregated in separate classes. This is on the grounds that their Japanese language skills may not be good enough for inclusion with the rest of the pupils, but it is applied even to children who are fluent in the language. Outside Japan, expatriate or visiting Japanese will stick almost exclusively to themselves. Back in the 1990s there was a controversy in Australia, I believe, over the construction of a luxury resort there by the Japanese, because it was exclusively for Japanese and no-one else. I don’t mean by this to claim that all Japanese are racist. I’ve met people, who lived in Japan, who admire them and who told me that in their experience they were a very kind people. The travel writer and historian William Dalrymple also describes the anti-Black racism he encountered in India in his book, In Xanadu. Arriving at a railway station with a friend, a Black American soldier, he approached a group of Indian porters, only to see them turn away, sneering at the Black American simply for being Black. Again, I don’t wish to imply that all Indians are racist either.

Racism and racial prejudice exists amongst all peoples and ethnic groups to a greater or lesser degree, even in this country. It is about time that there were proper academic studies of it amongst non-White ethnic groups and anti-White racism in this country. At the moment there is a feeling amongst Whites that only White on Black racism is taken seriously, and that prejudice against Whites is not only acceptable, but being fostered by supposed anti-racist activists.

If the authorities are serious about tackling racism, and all forms of it, that needs to change.

Disruption of Seaborne Trade in South East Asia: A Quantitative Analysis

Published by Anonymous (not verified) on Tue, 05/01/2021 - 4:50am in

Restrictions to shipping due to military sanctions could have large negative effects on economic welfare for countries all over the world, including oil exporters such as the UAE and Saudi Arabia

“Please see the individual videos for how each model was made”

Published by Anonymous (not verified) on Mon, 04/01/2021 - 1:19am in


YouTube, Japan

“Please see the individual videos for how each model was made”

Alan Merrill’s Japan: a Magical Moment

Published by Anonymous (not verified) on Wed, 01/04/2020 - 1:17am in

The coronavirus has taken the life of rock musician Alan Merrill at the premature age of 69. Alan was the son of jazz singer Helen Merrill, who survives him, and also the cousin of singer-songwriter Laura Nyro.

He is famous for composing the rock anthem, I Love Rock’n Roll, which became a huge hit for Joan Jett and was also covered, less memorably, by Britney Spears.

Not so well-known is his short, but spectacularly successful career in Japan.

Helen Merrill was based in Japan for several years in the late 1960s, as her husband was a music company executive who had been posted to Tokyo. Alan went to join her in 1968.

Just seventeen years old, he managed to carve out a niche for himself in the rapidly evolving Japanese music scene. Soon he was working as a session musician, releasing solo albums and appearing in TV commercials and cop shows, as well as hobnobbing with famed Japanese and foreign musos.

Times were good, as indicated by this extract from his diary for 1971 –

May 12th –  Afternoon, met Paul Rodgers (Free) with Yuki Shibata at Pub Cardinal Roppongi. Out drinking with Tetsu and Paul Kossoff ’til dawn. Free broke up. Koss is devastated. Drink with Koss and Tetsu at Akasaka Byblos til 3 AM. Then in Harajuku til 5AM.

May 13th– Fitting for a stage suit at Koshino Junko’s shop Colette. Go to the agency Dentsu, see Nissan poster for the first time. I look like a chick. I’d date me.

May 14th– Demo 9 originals for next album. Kossoff and Tetsu say they’ll play on the next record.

May 15thPaul Rodgers starts to date Machi and they’re kissing all the time. We go to Byblos and drink, then on to the restaurant Spiglow. Paul and Machi leave after a few bites to go make love at the hotel no doubt. Clearly in heat. Yuki and I finish our dinner where she tell me how in love she is with Andy Fraser, Free’s bassist.

By this time, the “Group Sounds” boom, modelled on British Invasion beat groups of the early 60s, had wound down and the more ambitious Japanese musicians were aiming for a new, more contemporary sound. Tetsu Yamauchi, mentioned above, was to move to Britain and join Free and then The Faces, featuring Rod Stewart.

In Tokyo, Alan Merrill got together with drummer Hiroshi Oguchi, formerly of The Tempters, one of the big three Group Sounds bands. Together, they formed Vodka Collins, Japan’s first glam rock band. The name was chosen because the cocktail was supposedly one of Keith Richards’ favourite tipples.

Alan loved The Rolling Stones, Lou Reed and Bowie, but his band’s template, in terms of both image and sound, was Marc Bolan’s T. Rex. Alan was up for that, having already cultivated an androgynous, cross-dressing style. He handled guitar, vocals – in both English and Japanese – and did all the song-writing.

Later, another two members were added – bassist Take Yokouchi and guitarist Hiroshi “Monsieur” Kamayatsu, formerly of The Spiders, another legend of the Group Sounds era.

Everything was going fine until Alan discovered one of the unshakeable verities of Japanese show business. The management takes the money. The musicians get peanuts, if they’re lucky.

For advice he asked his mother, now back in the U.S., who had long experience of exploitative financial arrangements. She told him to quit while the going was good, which he did. Immediately, on the eve of a sell-out concert at the Budokan.

The band’s only contemporaneous album, Tokyo / New York, hadn’t even been finished. Later, it was to become a classic of the genre.

Alan relocated to the UK. Almost straightaway, he formed a new group, Arrows, which went on to score a few minor hits and star in a TV series for British teeny-boppers. The song that he is most famous for languished on the B-side of an unsuccessful single, before being picked up by Joan Jett in 1982.

In later life, Alan reformed Vodka Collins and toured Japan, receiving a warm response from his by now middle-aged fans, and new albums were released under the band’s name. But it wasn’t the same. There was a moment and it passed, as such moments do. According to Alan, looking back in 2017, “it was a magical group in a magical time in a magical country.”

Alan Merrill kept going with total professionalism, releasing new material and playing regularly, until illness suddenly and cruelly struck him down.

Put another dime in the jukebox, Alan.


New Book: “On Kurosawa – A Tribute to the Master Director”

Published by Anonymous (not verified) on Sun, 14/04/2019 - 6:17pm in


Books, culture, Japan

My latest book “On Kurosawa – A Tribute to the Master Director” explores AK’s work and life, including all thirty of the films he directed, a dozen that he scripted or co-scripted for other directors, and key episodes and themes in his personal history.

Amongst these are the rupture with Toshiro Mifune, the death of his brother, his women, his war and his concept of the samurai in contrast to Yukio Mishima’s.

The quality of the book’s design has been highly praised. You can see for yourself by looking inside the book  at this dedicated website

A big THANK YOU to the writers, academics, friends,  film director and film producer who provided generous comments to the site.

The book is now available from Amazon.com, Amazon UK and, for those in or around Japan, from Shashasha.



Identity beyond Borders: Ethnicity in the American Pacific

Published by Anonymous (not verified) on Wed, 06/06/2018 - 11:39pm in



Evan Matsuyama gives a short talk on Japanese mortality, identity, and ethnicity in the Nikkei struggle against mass incarceration during World War II.

The Old Keynesian prescription to get out of a deep recession

Published by Anonymous (not verified) on Mon, 04/11/2013 - 12:07am in

In my previous post, I highlighted an article that shows the most promising unconventional monetary policies for boosting ailing economies right now are overt monetary financing and the policy measures advocated by neo-chartalists.

It's worth mentioning that, from a practical standpoint, this is essentially what the traditional, Keynesian IS-LM model would prescribe in a context of high public debt combined with nominal interest rates at the zero lower bound.

A good example of the application of IS-LM toward this end is Robert Gordon's analysis of the difficulties facing Japanese policymakers in the 1990s:

If monetary policy is impotent because it cannot reduce the interest rate any further, a fiscal stimulus is required to end the slump and bring back the output ratio back to its desired level [...]

The low level of the Japanese interest rate created a policy dilemma in Japan. Monetary policy could not push interest rates appreciably lower, yet fiscal policymakers felt constrained in achieving a large fiscal stimulus by the high existing level of the fiscal deficit in Japan and by the fact that the public debt in Japan had reached 100 percent of real GDP. 

However, the IS-LM model suggests a way out of the Japanese policy dilemma... [:] a combined monetary and fiscal policy stimulus that shifts the LM and IS curves rightward by the same amount can boost real GDP without any need for a decline in interest rates [...]

Also, with such a combined policy there is no need for a further increase in the national debt held by the public, since to achieve its monetary expansion, the central bank can buy the government bonds issued as a result of the increased fiscal deficit [...]

Why did the Bank of Japan resist what seemed to be the obvious solution, which was that the Bank buy up the government bonds issued as a result of the fiscal stimulus? This solution, sometimes called "monetizing the debt", would be the real-world equivalent of shifting the LM curve rightward along with the IS curve, in contrast to the increased interest rates that would result if the IS curve were pushed rightward without a corresponding rightward LM movement. Bank of Japan policymakers retreated into the traditional fear of central bankers that monetizing the debt would undermine the Bank's independence and credibility, two goals that are embedded in the structure of beliefs of central bankers. In fact, as a result of rapid inflation after World War II, the Bank is legally banned from buying bonds directly from government, although it is still able to purchase government bonds indirectly through financial markets. 

The traditional reason for the historic reluctance of central bankers to monetize the debt and conduct a simultaneous monetary and fiscal expansion has been fear of inflation. Yet Japan's problem in the late 1990s was deflation, not inflation [...]

While the prescription of the IS-LM model in favor of a combined monetary-fiscal expansion seemed clear, implementing this policy recommendation was blocked by the reluctance of the Bank of Japan's to give up its historic commitment to price stability. (137-138) (emphasis added)

One final word. This type of policy solution goes back a long way. A variant of this mechanism -- minus the IS-LM language -- is even found in (Keynesian) Lorie Tarshis's textbook published in 1947.


Gordon, R., Macroeconomics, Eighth Edition, 2000.

Does the concentration of finance matter?

Published by Anonymous (not verified) on Wed, 10/07/2013 - 1:19am in

It may sound like a strange question in light of all the talk about "too big to fail" during the last few years. But, believe or not, the idea that bank concentration has an impact on real economic activity isn't the standard view. Here's from a recent blog post by NY Fed economists Mary Amiti and David Weinstein:

The notion that financial institutions are large relative to the size of economies is not something that plays a prominent role in traditional economic theory. Macroeconomic textbooks tend to treat economies as composed of representative firms that are infinitesimal in size compared to any given market. As a result, positive and negative idiosyncratic shocks [movement in bank loan supply net of borrower characteristics and general credit conditions] to financial institutions cancel out due to the law of large numbers. 

However, this representation stands in stark contrast with the reality of concentration in financial markets. A striking regularity is that a few banks account for a substantial share of an economy’s loans.

Starting from this basis, Amiti and Weinstein have examined Japanese aggregate bank lending data and other aggregates and were able to demonstrate the following: banks matter, bank concentration matters, bank lending matters. No small feat.

On the issue of bank concentration and aggregate lending, they found that

...if markets are dominated by a few financial institutions, cuts in lending due to some change in financial conditions in just a small number of banks have the potential to substantially affect aggregate lending. Moreover, if firms find it hard to find good substitutes for loans like issuing equity or debt, then it is possible for their investment rates to fall as well. 

As for their take on banks' impact on the real economy, the conclusion to their paper (on which their blog post in based) gives a good summary:

Our paper contributes to this literature by providing the first evidence that shocks to the supply of credit affect firm investment rates. We find that even after controlling for firm credit shocks, loan supply shocks are a significant determinant of firm-level investment of loan-dependent firms. This result is particularly surprising because our sample is comprised of listed companies that have, by definition, access to equity markets. Moreover, the fact that so much lending is intermediated through a few financial institutions means that idiosyncratic shocks hitting large financial institutions can move aggregate lending and investment. We show that about 40 percent of the movement in these variables can be attributed to these granular bank shocks. This means that the idiosyncratic fates of large financial institutions are an important determinant of investment and real economic activity.

And the implication for policy, according to Amiti and Weinstein, is significant. Here is the relevant excerpt of their blog post on this point:

...[P]olicymakers without detailed information on the major financial institutions are likely to have a difficult time understanding the causes of lending and investment fluctuations. A large portion of Japan’s aggregate economic fluctuations can be traced to the country’s banking problems. 

While many researchers have focused on the implications of banks being “too big to fail,” we show that even if large banks do not fail, granular bank shocks can have substantial impacts on aggregate investment. 

For example, reductions in bank capital at large financial institutions can cause investment declines by firms that would like to borrow, while recapitalization of the right institutions can stimulate investment. In sum, this study shows that what happens to large financial institutions is important for understanding aggregate investment behavior. 

While their paper looks specifically at Japanese data, the authors suggest that the overall conclusions are relevant to the situation in the US given that it too has a very concentrated banking sector.

Amiti, Mary and David Weinstein, How much do banks shocks affect investment: Evidence from matched bank-firm loan data, NY Fed staff paper 604, March 2013