I was a student in Japan, I studied that during economic stagnation the national bank should set low interest rate to rent companies funds. Moreover, they said governments should keep primary balance positive. However that’s not true nor right now. The governments don’t have to spent money from basic incomes, because they get tax revenue every year.
The economists was insisting that the national banks should set low interest rate during economic stagnation, but it’s not true. If the national banks loan money at low interest, not every company can gather enough funds. On the other hand, if they set high interest rate, they can let foreigners invest onto their companies. Sum of all amount of money can be bigger than just by the national banks. Especially, for companies, which want to start new kinds of job, the banks don’t want to take risks but some investors like high risk & high return game. If the companies have funds they can start their job, and some would be fail but some would be succeed. Those will show new kinds of business, and give everyone dreams. That would help economy to take off from the stagnation. That means when they succeeded new business state would get benefit, but when they failed foreign investors would loose their capital. It’s almost no risks for domestic economic and social structures, except mental problems of people who fail their businesses.
New Zealand’s economic policy is the best example of this strategy. The NZ doesn’t have resources, which will make a large amount of money like oil areas, gold mines, coal and ironstone mines. So, NZ couldn’t pool enough amounts of funds investing to bring industries up, but now NZ government has set high interest rate, and many foreigners’ running their property here. As a result, many people want to exchange their currency to NZ dollars and it keeps strong price. On the other hand, Canada and Australia are also same situations. They’re using high interest rate and gathering funds all over the world. The stronger points of them are that they have natural resources. For instance, the Australia is main country which supplying the coals and ironstones to Asia include Japan, and the Canada is the biggest oil exporting country to United State of America. So, those currencies are staying very strong price. However, in the US the board of Federal Reserve Banks has to keep raising their interest higher to let money stay in America, or US dollars would be weaker. They don’t like weak US$, because that means they must pay more money to buy products from other countries, like Canadian oil. They don’t like letting money escape and high oil price.
The governments should spend money in their income, but they don’t have to afraid about that. The reason is structure of the organization. Basically, they don’t spend money like citizens. We spend money to buy food, cloth and something for hobbies, but governments spend money to construct roads, bridges, rails and so on. It is almost investing rather than consuming. Nothing is coming back after we bought things, but when they bought roads those infrastructures would support economy and they would benefit as tax revenue in the future. Moreover, they still have those roads. In the case, if they had to pay back national bonds immediately, they could sell the roads. Some times, the prices of things grow up, like prices of lands, buildings or houses. They might get profit from selling those infrastructures. At least, when the countries invest money, it would be salaries for some people, consumed and going to come back next year.
Japanese had used those kinds of economic strategy during the history, but we don’t now. I don’t know why, but at least, I think this is why Japanese economic is diminishing now.
The economists was insisting that the national banks should set low interest rate during economic stagnation, but it’s not true. If the national banks loan money at low interest, not every company can gather enough funds. On the other hand, if they set high interest rate, they can let foreigners invest onto their companies. Sum of all amount of money can be bigger than just by the national banks. Especially, for companies, which want to start new kinds of job, the banks don’t want to take risks but some investors like high risk & high return game. If the companies have funds they can start their job, and some would be fail but some would be succeed. Those will show new kinds of business, and give everyone dreams. That would help economy to take off from the stagnation. That means when they succeeded new business state would get benefit, but when they failed foreign investors would loose their capital. It’s almost no risks for domestic economic and social structures, except mental problems of people who fail their businesses.
New Zealand’s economic policy is the best example of this strategy. The NZ doesn’t have resources, which will make a large amount of money like oil areas, gold mines, coal and ironstone mines. So, NZ couldn’t pool enough amounts of funds investing to bring industries up, but now NZ government has set high interest rate, and many foreigners’ running their property here. As a result, many people want to exchange their currency to NZ dollars and it keeps strong price. On the other hand, Canada and Australia are also same situations. They’re using high interest rate and gathering funds all over the world. The stronger points of them are that they have natural resources. For instance, the Australia is main country which supplying the coals and ironstones to Asia include Japan, and the Canada is the biggest oil exporting country to United State of America. So, those currencies are staying very strong price. However, in the US the board of Federal Reserve Banks has to keep raising their interest higher to let money stay in America, or US dollars would be weaker. They don’t like weak US$, because that means they must pay more money to buy products from other countries, like Canadian oil. They don’t like letting money escape and high oil price.
The governments should spend money in their income, but they don’t have to afraid about that. The reason is structure of the organization. Basically, they don’t spend money like citizens. We spend money to buy food, cloth and something for hobbies, but governments spend money to construct roads, bridges, rails and so on. It is almost investing rather than consuming. Nothing is coming back after we bought things, but when they bought roads those infrastructures would support economy and they would benefit as tax revenue in the future. Moreover, they still have those roads. In the case, if they had to pay back national bonds immediately, they could sell the roads. Some times, the prices of things grow up, like prices of lands, buildings or houses. They might get profit from selling those infrastructures. At least, when the countries invest money, it would be salaries for some people, consumed and going to come back next year.
Japanese had used those kinds of economic strategy during the history, but we don’t now. I don’t know why, but at least, I think this is why Japanese economic is diminishing now.