1. http://www.investmentcontrarians.com/recession/money-printing-is-it-
taking-over-the-world/1134/
Money Printing: Is it Taking Over the
World?
By Sasha Cekerevac for Investment Contrarians | Dec 13, 2012
With the lack of economic growth around the world, more nations are looking at
expanding their monetary policy strategies in an effort to kick-start their economies. The
latest country showing a decrease in economic growth is Japan.
Reports out of Tokyo indicate that economic growth, as measured by the country’s gross
domestic product (GDP), declined at an annual rate of 3.5% in the third quarter. This
follows a revised second-quarter decline in economic growth by 0.1%, indicating the
nation is in a recession. (Source: “Japan Sinks Into Recession as Abe Calls for More
Stimulus,” Bloomberg, December 10, 2012.)
An important date for Japan is December 16, which is when the next election for that
nation will be held. The leader of the main opposition party in Japan, Shinzo Abe,
currently leading in the polls, has repeatedly stated that if elected, he will demand a
massive increase in monetary policy to try to stimulate Japan’s economic growth. He has
called for unlimited monetary policy easing, meaning endless money printing. (Source:
“Japan Sinks Into Recession as Abe Calls for More Stimulus,” Bloomberg, December 10,
2012.)
Many companies in Japan have been hurt by the country’s strong currency, the yen;
increasing monetary policy would be a step toward decreasing the value of the currency.
This is yet another example of the race to the bottom in currency devaluations around the
world.
Japan has been mired with decades of deflation. While many people fear inflation,
deflation is extremely dangerous. Many are calling for the Bank of Japan’s inflation
targets to be increased from one percent to the range of two to three percent. In either

2. case, much more monetary policy action will be required to generate inflation and erode
some of the value in the Japanese currency.
Japan is a good lesson in how generating economic growth purely from monetary policy
is extremely difficult. Japan has had many issues in trying to generate economic growth
over the past several decades, one of which was the Bank of Japan’s enactment of
monetary policy that was too weak and ineffective. This has led to poor, and even
negative, economic growth over the past two decades, as deflation has set in.
The current U.S. Federal Reserve Chairman, Ben Bernanke, has studied the Japanese
problem and is trying to prevent such a disastrous outcome for America. The problem
with his monetary policy initiatives is that perhaps too much is being done in attempting
to kick-start economic growth, which might end up hampering long-term GDP potential
due to over-stimulation, causing unintended consequences down the road.
Regardless of what one thinks of the prospects for Japanese economic growth in 2013, if
the election ends with Abe becoming prime minister, I would look for his nomination for
a new Bank of Japan Governor who is extremely concerned with increasing monetary
policy easing, which should put downward pressure on the Japanese yen.
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taking-over-the-world/1134/
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