Tag Archives: money printing

Japan Set to Give Details of $273 Billion Stimulus Package

Bloomberg, Aug 1, 2016

10-yr_japan_bond

* Abe seeks to prop up economy after BOJ keeps action minimal
* Economy minister to keep job in cabinet reshuffle: NHK

Japan’s government is set to announce details Tuesday of a 28 trillion yen ($273 billion) stimulus package, as it seeks to bolster an economy threatened by a strengthening yen and weak consumer spending.

Prime Minister Shinzo Abe flagged the size of the package in a speech last week, saying more investment was needed to expand the world’s third-largest economy. He said funds would be used to provide better port facilities for cruise ships and accelerate the construction of a high-speed maglev train line.

Actual spending will only make up about 7 trillion yen, according to a person familiar with the matter, with the rest consisting of loans and other financing, probably spread over several years. The package is the latest in a long series that have had limited impact on the economy, while Abe’s promise to make structural reforms — tackling areas like immigration and employment regulation — has fallen short of expectations.

The cabinet’s expected approval of the package comes as exporters grapple with the yen’s rise, Britain’s vote to leave the European Union and a slowdown in emerging economies. At the same time, concern is growing that the Bank of Japan is running out of options for further easing, after it made only minor policy adjustments at a meeting last week.

“The fiscal spending will probably include public works spending, so we can expect something of an economic boost,” said Masaki Kuwahara, an economist at Nomura Securities Co. in Tokyo. But such growth may not be sustainable. “What Japan needs to do is to spur more demand and increase productivity by pushing through deregulation, increasing the nation’s potential growth rate.”

Abe is seeking to expand the economy by 20 percent by 2020. To do so, he’s pledged measures to bolster household incomes, increase the birth rate and provide more care facilities for children and the elderly.

After announcing in June he would put off an increase in the sales tax, he promised last week to tap reserves in the unemployment insurance fund to lower premiums and increase payouts.

Cash Handouts

Natsuo Yamaguchi, leader of Abe’s junior coalition partner Komeito, told reporters on Tuesday after a meeting with Abe that the budget measures in the package would amount to 13.5 trillion yen and the stimulus would boost gross domestic product by about 1.3 percent.

NHK reported last week the package — the second to be compiled in the current fiscal year — would include cash handouts of 15,000 yen for those on low incomes, with 10.7 trillion yen set aside for infrastructure spending and 10.9 trillion yen to help smaller companies weather the impact of Brexit.

Exporters have suffered as the yen soared over the past six months from more than 120 yen to the dollar to about 103. Panasonic Corp. last week partly blamed the strong yen for a fall in quarterly profit. Household spending has dropped in 10 of the past 12 months.

The package comes the day before a minor cabinet reshuffle in which most senior ministers are expected to keep their posts. Economy Minister Nobuteru Ishihara will stay on, NHK reported, after speculation he might be replaced following the defeat of Abe’s candidate in the weekend election for Tokyo governor. Finance Minister Taro Aso and Chief Cabinet Secretary Yoshihide Suga will keep their jobs, according to local media.

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John Rubino: “Soon” And “Really, Really Crazy”: Starting Up The Helicopters

By John Rubino, Jul 13, 2016

“Soon” And “Really, Really Crazy”: Starting Up The Helicopters – DollarCollapse.com

This article is written by John Rubino of Dollarcollapse.com and with his kind permission, Gecko Research has been privileged to publish his work on our website. To find out more about Dollarcollapse.com, please visit:

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How can Trump ‘print the money’?

CNN Money, May 11, 2016

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Donald Trump says don’t worry, America will always be able to pay its debts because the government can simply print more money.

“This is the United States government. First of all, you never have to default because you print the money,” Trump told CNN’s Chris Cuomo on “New Day” Monday.

So how exactly do you print money?

At the most basic level, the Bureau of Engraving and Printing prints America’s paper money and the U.S. Mint makes the coins. Both agencies are part of the U.S. Treasury. You can see the money-making in person if you take a tour or watch it online. It’s a big printing machine that looks a lot like the printers used for a newspaper or school yearbook.

How the U.S. actually prints money

But the president isn’t the one who gets to flip the switch on the money-printing machines. Only the Federal Reserve — America’s independent central bank — can instruct the Bureau of Engraving and the U.S. Mint to print more money.

Typically, the Fed makes one phone call a year to the Bureau of Engraving with a request for more money to be printed. The latest call was made in July 2015 when the Fed ordered a little bit over $213 billion of new currency, which included a mix of dollar bills, $5 bills, $10 bills, $20 bills, etc.

The Fed has two goals when it makes that annual order: first, it has to replace bills that are destroyed because they are no longer usable (e.g. when people draw on them or cut them up). Second, the Fed anticipates how much additional cash will be needed as the economy grows.

‘Printing money’ is more than physical dollars

But when Trump or anyone else talks about “printing money,” they usually don’t mean manufacturing new bills and coins.

Physical dollars and coins are only a small part — about 10% — of the “money supply” in the economy. The other 90% is in electronic form in checking and savings accounts at banks. Currently, the U.S. money supply is about $12.7 trillion.

Instead of printing more physical dollars, it’s quicker for the Fed to get money into the economy by purchasing assets such as bonds from a bank. The Fed pays the banks dollars in exchange for the assets.

The Fed has been doing a lot of this

In that sense, the Fed has been “printing a lot of money” since the Great Recession by buying bonds from banks. The tactic has been dubbed “quantitative easing.”

The idea was to get more money into the bank vaults and grease the financial system. In 2008 and 2009, the financial crisis was exacerbated by the fact that many big banks didn’t have enough cash on hand to make good on what they owed others. To get money flowing, the Fed had to step in.

The hope was the extra money would make banks healthier and then they would start lending more to Main Street. That second part of the equation didn’t happen as much as policymakers desired. It’s one of the reasons there hasn’t been much inflation, the usual demon that comes along with printing money.

Why printing money is a bad idea

In economics classes, professors teach students that printing money is a bad idea. Why? Because when a government prints more money, it usually makes the money already in existence worth less.

Think about it like a pizza being divided up into even more slices. It won’t take long for people to realize that they need more of the new, smaller slices to equal one old slice.

Stores soon start charging more goods. A gallon of milk may jump from $3 to $5. It’s what economists call inflation.

“Zimbabwe is the prime example of how bad things can get,” says Wellesley College professor Dan Sichel, an economist who used to work at the Federal Reserve and U.S. Treasury.

America doesn’t want to become Zimbabwe

Zimbabwe printed so much money that prices shot up almost exponentially in the country (e.g. bread suddenly cost over a trillion Zimbabwe dollars). The currency basically became worthless in 2009 and the economy tanked.

The fear about Trump’s comment is that as president he would a) try to force the Fed to expand the money supply. That would harm the independence of America’s policy setting central bank. And b) that Trump would print money for the sole reason that the government didn’t have enough money to pay its bills.

Printing money solely to fund the government is very different than what the Fed has been trying to do with getting more money to banks to boost lending and economic growth, according to economist Doug Holtz-Eakin, a former advisor to John McCain’s 2008 presidential campaign.

Trump’s comment implied he would do something akin to the Zimbabwe-style money printing.

The U.S. has a long way to go to get to that point, but even heading down that path would send shock waves through global markets.

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Japan considers giving away money to boost consumption

RT, Mar 25, 2016

© Kim Kyung-Hoon

Following the examples Finland, Canada and the Netherlands, the Japanese government is considering issuing money ‘vouchers’ to poor young people.

Tokyo plans to include gift certificates for low-income youngsters in the fiscal supplementary budget this year. The measure aims to halt a significant decline in consumption among the young.

The vouchers are considered to be more effective than cash handouts that could be deposited. People might use the coupons for their daily needs.

Consumption among young people is key to economic growth, according to the Japanese government. Recent surveys have shown that under 34-year old Japanese have cut spending by 11.7 percent year on year.

Japan is not the only country considering implementing the system known as ‘basic income’. Last November the Finnish social insurance institution proposed to allot a tax-free income of €800 per month. In various cities throughout the Netherlands people will receive an extra €1,100.

In February, authorities in Canada’s Ontario Province voiced plans to launch a pilot program of basic income later this year. Switzerland is due to hold a referendum on the issue this year.

Basic income was initially proposed in the 1960s and briefly tried out in the US and Canada. The idea has gained popularity in recent years as it could level income and wealth inequality.

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How Accurate Are Central Bank Forecasts?

Bloomberg, Jul 9, 2015

Bloomberg’s Jennifer Ryan discusses central bank forecasts and which institution is most accurate. She speaks with Manus Cranny on Bloomberg Television’s “The Pulse.”

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