The bank of Japan has decided to fight deflation. After all of these years, a populist came to power who was determined to help the little people.
In a deflationary environment the owners of assets (money), benefit and the people without assets lose out.
When you hear people screaming about inflation pay very close attention to their wallet sizes.
If you don’t believe me, just go watch Downton Abbey. The aristocracy in England benefited from an amazing deflationary asset: Land. No new land was being created, and more people were being born, which meant that existing land holdings increased in value. Because the land holdings were concentrated into a few hands because of a rigorous enforcement of primogeniture no new land entered the market. As a result land increased in value and the owners of it became increasingly wealthy.
Net effect? The wealthier you were, the wealthier you became without doing anything. The aristocracy was so wealthy they were able to have 10’s of servants for a very small family. And their wealth translated into power that they were able to wield.
What broke their power? Why it was the introduction of an inflationary asset, you know something that increased as a result of people taking actions … Printed money and fractional reserve banking. That inflationary asset created people with new wealth and power that destroyed that aristocracy.
Why do people love the gold standard? Because people who have gold become wealthier just by holding onto their gold. If you look back into American history the populists had a saying about gold…Here’s the quote from William Bryant Jennings:
If they dare to come out in the open field and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of the nation and the world. Having behind us the commercial interests and the laboring interests and all the toiling masses, we shall answer their demands for a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.
If you believe that we should create new business and new growth then moderate inflation is not a bad thing. Yes it sucks to have to keep creating wealth, it sucks when asset bubbles form because of excess credit, but a freely flowing currency enables new business and new growth and new opportunities. If you believe that you should live off of your existing assets and not work, then moderate inflation is a terrible thing.
For the well off this is a choice. For everyone else it’s a weird universe they don’t understand.
I never thought the revolution would begin in Japan. There is hope for this world, yet.