So Haruhiko Kuroda, new governor of the Bank of Japan, joins the ranks of the financial rock stars alongside the Fed's Ben Bernanke and Europe's Mario Draghi. These are the real masters of the universe. Their word is more than law; it is money.
It took just the one phrase from Draghi, that he would do "whatever it takes," to calm last year's euro crisis. He meant that he was prepared to buy as many government bonds as required to ensure that a member of the euro zone wouldn't be forced out of the currency union by bankruptcy.
That is a very big promise to make but for today's central bankers the grandiose gesture has become routine. Bernanke at the Fed has become the trillion-a-year man, spending $85 billion a month -- $1 trillion a year -- to buy assets that are supposed to stimulate the overall economy. That means $45 billion of Treasury bonds and $40 billion mortgage-backed securities (remember them?).
And let us not forget that when this financial crisis began, the Fed's balance sheet was just more than $700 billion and since then it has more than tripled. Add together the measures taken by the Fed, the European Central Bank, the Bank of Japan and Bank of England and the way China's central bank ordered its commercial banks to lend as never before, and more than $10 trillion has been poured into this global economy.
Now comes Hurricane Kuroda from Tokyo, with a mandate from his prime minister to do even more to help haul the Japanese economy out of two decades of stagnation.
Part of the problem has been that prices have either remained stuck of dwindled steadily lower since Japan's property bubble burst after 1990, so consumers wait before they spend, expecting prices to drop. Now he is promising to give Japan 2 percent inflation within two years.
At the same time, he is following in Bernanke's footsteps by promising to buy $50 billion of government bonds a month and to double the country's monetary base by the end of next year.
This is financial tinkering on a heroic scale and it raises three serious questions. The first is: Why, after all this money being created and assets being bought and massive interventions to save the financial system, is the recovery so feeble?
The second question is: Just how is the new Bank of Japan policy different from a deliberate attempt to devalue the currency and boost exports by driving down the value of the yen?
Tsinghua University Professor Li Daokui, , a former adviser to the People's Bank of Chin, called Japan's move "the latest round of the global currency war" in remarks to the Chinese media Friday, adding "the massive monetary stimulus by the Japanese central bank could spell doom for other nations in the region."
The third question is: Do the central bankers really know what they are doing? They have devised fancy terms, like QE -- quantitative easing -- but what they are basically doing is printing money. Traditional economic theory says this is bound eventually to produce inflation.
But inflation has seldom looked less threatening. There are reasons for this. High unemployment means workers have trouble demanding higher wages. Many factories are working at less than capacity. And consumers, worried by their own levels of debt, aren't spending like they used to. Above all, U.S. corporations simply don't believe that there is much demand in the economy; that is why they are sitting on close to $2 trillion in corporate treasuries rather than investing it in new plant and equipment.
However, remembering how tough it was to drive inflation out of the system in the 1980s, when interest rates were more than 15 percent, it seems more than risky to try deliberately producing it today. The fact is that the world's central bankers are engaged in a gigantic experiment with the global economy and it will be some time before we guinea pigs find out if their QE theories are right.
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