To: firstname.lastname@example.org; email@example.com
Subject: Economic Fallacy
Date: Mon, 14 Mar 2011 05:52:48 -0400
re: Japan could emerge stronger from the catastrophic quake, by Tom Stevenson
Mr. Tom Stevenson is the latest financial "expert" to be blinded by the illusions of monetary expansion. In his column on Sunday, March 13 he stated the following:
"In the short term, the impact on the Japanese economy will be negative...Further out, the rebuilding effort will probably stimulate the economy via construction and other capital spending. The net impact on GDP might be positive, not the least because the Bank of Japan quickly made it clear it will provide whatever liquidity is required."
This is the nonsensical conclusion that one draws from blind adherence to Keynesian economics, which equates demand-side monetary expansion with an increase in the well-being of an economy. By this logic one should rejoice at the destruction of war and natural disasters that destroy capital and lives. Perhaps we all should burn down our homes, factories, and shops, so that our central banks can shower us with pieces of paper, making us feel oh-so-rich! Japan needs savings, not spending, to obtain the capital it will need to rebuild. Monetary expansion does not create new capital. It is nothing more than an accounting fiction, made possible by the ability of central banks to create fiat money out of thin air.