Financial storm clouds gather

The question then was how to get the economy up off its knees and operating "normally" again.

So effective had the bust been that the Japanese economy - the real economy - just couldn't get up again. Growth, fixed-capital investment and employment remained slumped despite persistent injection of masses of money to stimulate them.

Japan was then the world's second largest economy, efficient, sophisticated and admired for its miraculous recovery from the devastation of World War Two . To restore growth would seem to be a simple matter: lower interest rates and apply quantitative stimuli. The latter had been called Open-Market Operations by the British in an earlier period and were to be called Quantitative Easing especially after the advent of the Global Financial crisis.

The Japanese central bank duly lowered interest rates and applied Quantitative Easing. The situation remained stubbornly subdued. Growth failed to make a robust appearance despite repeated variations and huge volumes of monetary stimuli. The central bank lowered its cash rate to zero. All it got was more deflation.

Deflation?

That was a word that had virtually disappeared from the dictionary of the post-war economist, especially after Nixon hiked interest rates in 1969; but Japan went on from the busts of the late 1980s and early 1990s to be acutely aware of deflation and its impact on the economy right up to the present day.

It is still struggling to get a hold on a monetary evil that can be even more devastating in many ways than the evil of inflation whether of assets or consumer goods and services. So Japan's misery of deflation has gone on for more than twenty years while the United States and most other major developed economies have struggled with the opposite, inflation.

Why is this?
In "America's Suicidal Statecraft" I referred to a President - later Emperor - of the Central African Republic/Empire

throwing money in the air when he went on walkabout with his poverty-stricken citizens. At a more sophisticated level, Fed Chairman Bernanke, who is a distinguished student of the Great Depression and modern Japan, was reported to favour dropping money from helicopters to stimulate the American economy.

He has not used helicopters but he has thrown trillions of dollars to bankers and other favoured "financiers" in the years since the Lehman collapse of 2008. The amounts have been so

staggeringly high as to be unprecedented in monetary history; and they continue still.

During virtually the whole period, interest rates have been kept at historic lows, near zero. From time to time, virtual guarantees have been given that rates will remain "accommodative" for long periods in the future.