Japan humbles itself before Standard and Poor’s
If there’s anything more absurd than Standard and Poor’s downgrading of Japanese government debt today, it’s the Japanese government’s submissive response to it in which it promised to “step up its efforts to increase revenue and pare debt”. The government, of course, is the sole issuer of the yen and can create as many of them as it wishes at no cost. Yet, at a time of historically high unemployment, when one-third of college graduates cannot even find jobs, and faced with an economy that’s been operating far below potential for two decades, Japan humbly bows to the tyrants of high finance and promises to reduce even further the amount of yen in circulation.
It’s not possible for the monopoly supplier of the yen to default on yen debt and to be consistent, S&P should downgrade every Japanese corporation that borrows in yen. Yet Toyota and a number of major Japanese corporations are rated higher than the government! Absolutely ludicrous.
The central problem is that the power centers of the world economy want to pretend money is a commodity that has a limited supply. We remain firmly imbedded within the institutional constraints of the gold standard and we will not progress as a society until we escape it.