35 Trillion Reasons VII
Part VII - Conclusion
The BOJ/MOF stopped intervening in March 2004. By that time, the Fed had indicated that it planned to begin tightening interest rates. That put a stop to the private sector capital flight out of the dollar. Therefore no more intervention was required.
At the same time, by the end of the first quarter of 2004, it was becoming clear that strong economic growth in the US was creating higher than anticipated tax revenues. That meant a smaller than expected budget deficit.
In July, the President's Office of Management and Budget revised down its estimate of the budget deficit from $521 billion to $445 billion. The actual deficit turned out to be $413 billion. Thus less funding was required than initially anticipated.
So, what did motivate the monetary authorities in Japan to create the equivalent of 1% of global GDP and lend it to the United States? Was it simply, straightforward self interest to prevent a very sharp surge in the value of the yen?
Was it globally coordinated monetary policy designed to pull the world out of the 2001 slump and prevent deflation in the United States? Or, was it necessary to stave off a US balance of payments crisis that would have produced a global economic crisis?
Perhaps it was only straightforward foreign exchange intervention to prevent a crippling rise in the value of the yen. Intentionally or otherwise, however, by creating and lending the equivalent of $320 billion to the United States, the Bank of Japan and the Japanese Ministry of Finance counteracted a private sector run on the dollar.
And, at the same time, financed the US tax cuts that reflated the global economy, all this while holding US long bond yields down near historically low levels.
In 2004, the global economy grew at the fastest rate in 30 years. Money creation by the Bank of Japan on an unprecedented scale was perhaps the most important factor responsible for that growth.
In fact, ¥35 trillion could have made the difference between global reflation and global deflation. I find it odd that all of this went unnoticed by the mainstream media and has never been mentioned in any Fed speeches or thinktank publications. Makes one wonder, doesn't it?
This series has touched upon the topics that we have talked about in The Name of The Game I, II, III, IV, V , Epilogue and Forex Arbitrage Fraud; and in Meet the New Boss I, II, III, IV and V.
I wish to thank Richard Duncan of Finance Asia, the author of the expose upon which this serialization has been based.
The BOJ/MOF stopped intervening in March 2004. By that time, the Fed had indicated that it planned to begin tightening interest rates. That put a stop to the private sector capital flight out of the dollar. Therefore no more intervention was required.
At the same time, by the end of the first quarter of 2004, it was becoming clear that strong economic growth in the US was creating higher than anticipated tax revenues. That meant a smaller than expected budget deficit.
In July, the President's Office of Management and Budget revised down its estimate of the budget deficit from $521 billion to $445 billion. The actual deficit turned out to be $413 billion. Thus less funding was required than initially anticipated.
So, what did motivate the monetary authorities in Japan to create the equivalent of 1% of global GDP and lend it to the United States? Was it simply, straightforward self interest to prevent a very sharp surge in the value of the yen?
Was it globally coordinated monetary policy designed to pull the world out of the 2001 slump and prevent deflation in the United States? Or, was it necessary to stave off a US balance of payments crisis that would have produced a global economic crisis?
Perhaps it was only straightforward foreign exchange intervention to prevent a crippling rise in the value of the yen. Intentionally or otherwise, however, by creating and lending the equivalent of $320 billion to the United States, the Bank of Japan and the Japanese Ministry of Finance counteracted a private sector run on the dollar.
And, at the same time, financed the US tax cuts that reflated the global economy, all this while holding US long bond yields down near historically low levels.
In 2004, the global economy grew at the fastest rate in 30 years. Money creation by the Bank of Japan on an unprecedented scale was perhaps the most important factor responsible for that growth.
In fact, ¥35 trillion could have made the difference between global reflation and global deflation. I find it odd that all of this went unnoticed by the mainstream media and has never been mentioned in any Fed speeches or thinktank publications. Makes one wonder, doesn't it?
This series has touched upon the topics that we have talked about in The Name of The Game I, II, III, IV, V , Epilogue and Forex Arbitrage Fraud; and in Meet the New Boss I, II, III, IV and V.
I wish to thank Richard Duncan of Finance Asia, the author of the expose upon which this serialization has been based.
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